Oil benchmarks extended their advance on Tuesday, with Brent futures up about 1.3% to $107.01 a barrel and West Texas Intermediate up a similar amount to $102.69, as attacks on Saudi energy infrastructure deepened concerns that the Middle East’s remaining export routes are becoming increasingly fragile.
Former White House senior advisor Amos Hochstein, now a managing partner at TWG Global, told CNBC that paper market prices are “wrong and too low” despite WTI and Brent already trading above $100. He said physical crude transactions are fetching spot premiums between $120 and $150 per barrel, while U.S. diesel near $6.20–$6.23 a gallon historically aligns with $200 crude and average gasoline around $4.30 corresponds to $125–$130 crude.
The most important development is the shutdown of Saudi Arabia’s East-West pipeline, a 1,200-kilometre route from eastern fields to the Red Sea that allows exports to bypass the Strait of Hormuz. Saudi Arabia closed it after a drone attack blamed on Iran-backed militias in Iraq, and regional officials told the Associated Press repairs could take three to five weeks. Rystad Energy said the line had been moving between 2.6 million and 4 million barrels a day through Yanbu since late August — at the upper end roughly 4% of global oil supply. Rystad’s Janiv Shah said the rise in Brent already reflects a meaningful loss of supply and warned that Saudi inventories can cushion exports only temporarily.
Alternative routes are not functioning normally. Traffic through the Strait of Hormuz remains far below pre-war levels, while Houthi pressure around Bab el-Mandeb threatens another major passage. Melius Research estimated about 3 million barrels a day were moving through Bab el-Mandeb in early September, but flows may now be effectively zero. Commonwealth Bank of Australia strategist Vivek Dhar said Chinese crude imports are rising while meaningful new non-OPEC+ supply outside the Middle East may not arrive until 2027, and he sees an increasingly plausible scenario in which global oil and refined-product inventories provide only five to 11 weeks of cover.
The squeeze extends beyond crude. Ukrainian strikes on Russian refining capacity have shifted Moscow from a supplier that once accounted for 11% of global diesel exports into a net importer, while refined products from Gulf producers including Kuwait, Saudi Arabia and the UAE are unable to exit the region at normal volumes. Analysts warn that without rapid intervention or emergency route restoration, paper futures will be forced to catch up with physical reality, creating inflationary spillovers and cost pressure across transport, production and consumer economies. For cryptocurrency markets, the energy-driven inflation shock reinforces a macro risk-off environment that can weigh on digital assets through higher input costs and potential monetary-policy spillovers.
