Explosions in Saudi Arabia lift crude oil

Oil prices opened sharply higher on Monday after reports emerged of explosions in southwestern Saudi Arabia, according to ForexLive. Yemeni ballistic missiles reportedly struck Khamis Mushait, while drones allegedly attacked the airport in Abha in the Asir province – this according to the Iranian news agency Fars News Agency. These claims have not yet been independently verified.

The attacks represent a geographic expansion of a conflict that has until now been centered primarily around the Strait of Hormuz and direct Iranian-American confrontations.

The conflict has now opened a new front – and the oil price is pricing in the risk immediately.
Oil prices explode: Saudi Arabia attacked – new front in the Middle East war - Bilde 1

Six-week rally gains fresh momentum

The reports come after crude oil had already climbed to a six-week high last week. Brent rose approximately 8% and WTI nearly 10%, driven by Iran's pledges to strike energy infrastructure in the Gulf if the US carries out further attacks on Iranian targets, according to ForexLive.

Iran's parliamentary speaker Mohammad Baqer Qalibaf warned on Monday that any attack on Iranian interests would be met in kind. The weekend had already brought a marked escalation, with mutual attacks on oil tankers and naval vessels between the US and Iran – the most serious incident yet since the conflict broke out in late February.

+8%
Brent last week
+10%
WTI last week
Oil prices explode: Saudi Arabia attacked – new front in the Middle East war - Bilde 2

Hormuz under pressure – inventories near the bottom

Maritime analysis firm Marisks has noted that commercial tankers are increasingly being used as leverage in the conflict, blurring the line between military and commercial targets. Hormuz shipping traffic has fallen to its lowest level since May, while US gasoline and distillate inventories are well below both last year's levels and the five-year seasonal average.

Iran is also expected to announce a limited zone outside the Strait of Hormuz within the coming days, which would place additional pressure on global tanker routing.

OPEC+ provides no counterweight

OPEC+ decided to leave its October production policy unchanged, citing the fact that new quotas have not yet been agreed. That means there is no short-term release valve to dampen price increases should supply disruptions worsen further. The market is therefore entirely at the mercy of headline risk from both theaters – the Red Sea and the Gulf.

Norwegian perspective

For Norwegian players, the developments are doubly relevant. A sustained rise in oil prices will strengthen revenues in Norway's petroleum sector and provide a tailwind for OSEBX-heavy energy stocks such as Equinor. At the same time, higher energy prices and increased global inflation will complicate Norges Bank's assessments of the interest rate path going forward. The oil market is in a state where even moderate escalation signals can produce large price swings – and today delivered exactly that.