Hormuz Shipping Attacks Intensify as Houthis Target Saudi Oil Infrastructure

  • Attacks on shipping near the Strait of Hormuz intensified on Wednesday, October 14, with the container ship GFS Pride and a dry bulk carrier both sinking after being hit by projectiles in separate incidents. The escalation supported oil prices, with Brent crude settling 0.35% higher at US$106.06 per barrel and West Texas Intermediate rising 1.01% to US$95.09, its highest level in three weeks.
  • Tehran began using new offensive tactics around 10 days ago against vessels it considers to be violating its restrictions on the Strait. The conflict has also widened in Saudi Arabia, where Yemen’s Iran-aligned Houthis vowed to continue attacking Saudi airports and oil facilities after striking Saudi Aramco’s headquarters in Dhahran on Tuesday night.
  • A recovery in Middle East oil supply was underway in September, with Gulf oil flows excluding Iran recovering to more than 81% of pre-war levels, led by stronger Saudi exports. However, the recent escalation in attacks on regional energy infrastructure and tanker traffic threatens further gains, while record tanker rates have increased crude delivery costs and eroded refinery margins.
  • On refined products, the International Energy Agency (IEA) warned that global diesel markets could remain tight well into 2027, despite the recently announced US-Russia diesel arrangement. Global diesel exports in September were 700,000 barrels per day lower year-over-year, as a 1.3Mn barrels-per-day loss from Russia and the Middle East was only partly offset by higher supply elsewhere.
  • The latest escalation raises the risk that the Middle East conflict affects energy markets through several channels at once: attacks on Hormuz shipping, threats to Saudi oil infrastructure and persistent diesel shortages. Even as Gulf crude flows recover, greater risks to vessels and infrastructure could keep an elevated geopolitical premium in oil and freight costs, prolonging inflationary pressure globally.

(Sources: Reuters & International Energy Agency)