Oil prices started the week with growth amid increased attacks on tankers by Iran and Houthi attacks on Saudi Arabia's oil infrastructure

The unexpectedly rapid capture of the entire territory along the Bab el-Mandeb Strait and the transfer of control of the passage of ships through the Bab el-Mandeb Strait to the pro-Iranian Yemeni Houthis virtually stopped oil supplies from Saudi Arabia and led to a sharp jump in oil prices.

November Brent crude futures fell 3.5% on Friday amid profit-taking after a rise, but overall rose 9.4% for the week to $105/barrel (+20.5% for the month).

Friday's price drop came after the International Energy Agency (IEA) warned that high prices and tight oil supplies would lead to the biggest drop in global oil demand this year since the COVID-19 pandemic. But despite the projected demand decline, the IEA raised its estimate of a global oil shortage in 2026 from 1.3 million barrels per day to 1.7 million barrels per day.

A meeting between representatives of Iran and the Persian Gulf countries scheduled for September 14 in Oman to discuss de-escalation and the resumption of oil exports from the region has been canceled.

Over the weekend, pro-Iranian forces from Iraq attacked the East-West pipeline in Saudi Arabia with drones, which stopped the pumping of oil. Recall that Saudi Arabia launched this route to transport its oil west to the Red Sea, bypassing Hormuz, and pumps about 4-5 million barrels / day through it. Before the war, SA exported about 10 million barrels of oil per day.

The Yemeni Houthi group also announced the launch of drone and missile strikes on a military base in southern Saudi Arabia.

The Saudi Arabian authorities, which have the most well-equipped army in the region among other Arab countries, have not responded to attacks by the Houthis and pro-Iranian forces on oil infrastructure, so we expect their further steps.

Iran and Oman held consultations last week on safe shipping through the strait, but Tehran says their understanding will create a basis for further negotiations, not for an immediate reopening of the Strait of Hormuz.