Brent crude jumped 3% at Monday's open, reaching $107.7 a barrel, after fresh attacks on Saudi energy facilities and on a ship in the Strait of Hormuz, the narrow Gulf corridor that carries much of the world's seaborne oil. European stock markets traded mostly lower, Folha de S.Paulo reported, with an artificial intelligence warning also dragging down technology shares. Later in the session Brent stood at $107.54, up 2.8%, while the US benchmark WTI rose 2.9%, to $102.93, according to news site G1 and to Reuters.
The move extends a war that began six months ago, started by the United States and Israel, and that has seen no peace talks since a provisional deal collapsed in June. Last week oil had already risen 8% and crossed $100 for the first time since July. Monday's trigger was the temporary shutdown of the East-West pipeline in Saudi Arabia after a drone attack, according to Saudi authorities. The line lets the kingdom bypass the Strait of Hormuz, and its paralysis threatens up to 4% of global oil supply, since stocks at the Red Sea port of Yanbu cover only five to seven days of exports.
For Brazil, a barrel above $107 cuts both ways. An oil exporter, the country tends to capture part of the rally, but domestic fuel prices track international markets, so a costlier barrel tends to push gasoline and diesel up at the pump and stir the debate over inflation. The longer the Gulf conflict lasts, the greater the risk of dearer freight and marine insurance for global trade.
A supply shock on two routes
The crisis now reaches both exit routes for Gulf oil. In the Strait of Hormuz, a vessel was hit by a projectile, caught fire and forced its crew to abandon ship, the British maritime security agency UKMTO (United Kingdom Maritime Trade Operations) said. Iran said one person died and four crew members were injured on an Iranian commercial ship attacked off the country's coast. In Saudi Arabia, state media released video of homes and a mosque damaged in the southern province of Jazan, blamed on a Houthi attack, and the group also claimed a strike on a military base in a neighboring province. The Iran-aligned Houthis from Yemen reached Perim island on Friday, moving to tighten their grip on the Bab el-Mandeb strait, which has carried 4% to 5% of global supply in recent months.
The interests at stake
The United States and Israel opened the war six months ago, and US President Donald Trump has even said the US could stay in Iran and keep its oil, comparing the idea with an attempt to take control of a fifth of Venezuela's reserves, according to Reuters. On the other side, Iran and the Houthis have attacked Saudi energy infrastructure and expanded their control over maritime chokepoints. The Gulf monarchies were trying to open a diplomatic channel: a meeting with Iran on the Strait of Hormuz, set for Monday in Oman, was postponed, Oman's foreign minister Badr Albusaidi said.
"This comes after an escalation of attacks on Saudi energy infrastructure, including the East-West pipeline, which is of crucial importance," ING's commodities strategists said, noting that the severity of the damage and how long the pipeline will remain offline are still unclear. With the Oman meeting postponed, no negotiations are under way to reduce the tension.