Saudi pipeline attack fuels oil rally as supply risks return

Vijay Valecha, Wed, Sept 14, 2026 Khaleej Times

Global oil markets have started the week on a firm footing, with crude prices continuing to climb above the $100-a-barrel mark as traders assess the implications of a drone attack on Saudi Arabia’s East-West pipeline and renewed uncertainty around energy flows from the Middle East.

Brent crude futures surged $2.72, or 2.6 per cent, to $107.33 per barrel at 1539 GMT, having hit a session high of $108.65 earlier, according to Reuters data. US West Texas Intermediate (WTI) crude rose $2.51, or 2.5 per cent, to $102.56.

The latest rally follows Saudi Arabia’s decision to halt operations on the East-West pipeline, a major export route capable of transporting around 7 million barrels per day and a critical alternative to shipments through the Strait of Hormuz. The move came after drones damaged the pipeline, although the extent of the damage and the timeline for reopening remain unclear.

According to Vijay Valecha, Chief Investment Officer at Century Financial, the shutdown has heightened fears of tighter supplies at a time when geopolitical tensions are already disrupting trade routes across the region. “If the pipeline closure is prolonged, it could lead to output cuts by the Kingdom, suggesting a short-term bullish market structure,” he said.

Valecha noted that crude prices have posted gains of more than 9% for two consecutive weeks, underlining strong bullish momentum. However, he cautioned that technical indicators are approaching overbought territory, raising the possibility of short-term profit-taking even as prices trend higher.

Market participants are also watching diplomatic developments closely. While previous episodes of heightened tensions in the region have often produced temporary price spikes, much depends on whether producers can maintain export flows and whether shipping operations remain largely uninterrupted. The postponement of talks aimed at establishing temporary shipping arrangements through Hormuz has added to uncertainty, leaving investors with limited visibility on how quickly current bottlenecks could be resolved.

The latest gains in oil have also revived concerns among central banks and policymakers already grappling with inflation risks. Higher crude prices typically feed through to transportation, manufacturing and logistics costs, potentially complicating efforts to keep consumer prices under control. For importing economies, sustained prices above $100 a barrel could increase pressure on trade balances and household spending, particularly if elevated energy costs persist into the final quarter of the year.

At the same time, analysts note that the market’s reaction reflects not only the loss of a key export route but also a growing risk premium tied to geopolitical uncertainty. Even if physical supplies remain broadly adequate, traders often price in the possibility of further disruptions when tensions escalate around critical energy infrastructure.

For now, attention remains fixed on the pace of repair work in Saudi Arabia and the security situation around regional shipping lanes. A swift resumption of pipeline operations could ease some of the current concerns, but any signs of prolonged disruption or further attacks may keep oil prices elevated and markets on edge in the weeks ahead

Khaleej Times