Oil prices surged on Monday as fresh attacks in the Strait of Hormuz and the shutdown of Saudi Arabia's main bypass pipeline reignited concerns that vital Middle East supply routes are becoming increasingly unreliable. Brent crude for October and November delivery jumped more than 3% to trade above $108 a barrel, while the US benchmark West Texas Intermediate rose 2.3% to around $102, extending last week's gains after both contracts reclaimed the $100 mark.
The immediate trigger was Saudi Arabia's announcement that its East-West pipeline, which carries crude across the kingdom to Red Sea ports, had been temporarily closed following drone strikes. That pipeline is the primary alternative for Saudi oil exports to bypass the Strait of Hormuz, so its loss removes a crucial safety valve at a time when the strait itself is most dangerous.
The danger was underscored on Sunday when a merchant vessel was struck in the strait, killing one crew member and injuring three others, according to Iranian authorities. The incident is the latest in a series of attacks that have fundamentally altered how shipping operates in the waterway, which handles a significant share of the world's seaborne oil trade.
Strait of Hormuz under Tehran's control
Passage through the strait now works very differently from before the conflict. Vessels must obtain Iranian permission to transit, and Tehran is considering a mechanism to charge service fees. Ships that fail to comply are routinely targeted, while US forces periodically bomb the Iranian coastline to contest Tehran's claim to control the strait. The result is a precarious environment for tanker operators and insurers, with many rerouting or paying higher premiums.
Diplomatic efforts to de-escalate have stalled. Oman has postponed planned talks between Iran and Gulf states on the future of the waterway, which carries a large share of the world's seaborne oil. The delay suggests that a negotiated solution remains distant, leaving the market to price in prolonged disruption.
Fuel prices hit record highs
The consequences are being felt acutely at the pump, particularly in the United States. The national average price of diesel crossed $6 a gallon on Friday for the first time in history, up from around $5.85 a week earlier and roughly 60% above the $3.71 drivers paid a year ago. Petrol is also averaging $4.22 after setting records over the Labor Day weekend.
US President Donald Trump has sought to shift blame, telling reporters in Ireland on Sunday that Ukrainian President Volodymyr Zelenskyy "has to stop knocking out diesel fuel in Russia." Trump, who was attending the Irish Open at his Doonbeg golf resort, added: "Let him go after targets, but not diesel fuel, because he's causing a shortage of diesel fuel." He reiterated the claim on the flight back from his state visit.
However, the supply arithmetic suggests otherwise. Analysts attribute roughly 800,000 barrels a day of lost diesel supply to Russia's export ban, against about 1.2 million from disruption around the Strait of Hormuz, according to Lipow Oil Associates. The wider picture is even more lopsided: crude flows through the strait have fallen from around 20 million barrels a day before the war to about 7 million. Between them, the two wars have also shut refineries representing around 5 million barrels a day of capacity.
For Europe, the implications are significant. The continent relies heavily on Middle East crude and refined products, and any sustained disruption will feed into already elevated energy prices, complicating the European Central Bank's efforts to tame inflation. The ECB's recent rate hikes have already had uneven effects across eurozone mortgage markets, and further energy price shocks could deepen the divergence.
The attacks on Saudi infrastructure and shipping are part of a broader pattern of Russian hybrid attacks that NATO has struggled to counter, according to analysts. While the immediate focus is on the Gulf, the knock-on effects for European energy security are profound.
As the situation evolves, market participants will be watching for any signs of de-escalation or further disruption. For now, the risk premium in oil prices reflects a reality where the world's most critical energy chokepoint is no longer reliably open.
