Will oil prices soar due to attacks on Saudi Arabia?

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, commented for the Ura.ru online portal on the possible impact on the global oil market of the latest escalation in the confrontation between Saudi Arabia and the Yemeni Houthis.

Oil prices reacted with an increase to the attacks by the Yemeni Houthis on Saudi Arabia’s oil facilities. However, the moderate nature of this surge indicates that the market does not believe this conflict will escalate to a new level, Alexey Gromov says. Riyadh’s partners under the new military agreement are also unlikely to get involved in the confrontation with the Houthis, he believes.

“At the moment, the market is reacting nervously to any escalations in the Persian Gulf region. Especially when attacks occur that have not happened before. It is already nervous because on September 4, Iran and the United States exchanged strikes on oil tankers in the Strait of Hormuz.” Now, in addition to effectively hindering navigation in the Bab‑el‑Mandeb Strait, the Houthis are also attacking energy infrastructure facilities,” the expert notes.

The surge in raw material prices caused by the Houthis’ attacks was moderate, which shows that the market does not have much faith in the escalation of this conflict and views it as isolated attacks, Gromov noted. If it doesn’t come to any systemic attacks, this factor won’t significantly change the price level.

“I think that pacts on military partnership, such as the one concluded between Saudi Arabia, Pakistan, and Turkey, are primarily aimed at potential interstate conflicts. And in this case, understanding the nature of the confrontation and the ineffectiveness of its military settlement, the partners will not make decisions such as deploying a military contingent or carrying out air strikes against Houthi targets, which would have long‑lasting consequences. Therefore, on the one hand, this is a reason for a certain spike in oil prices, and on the other hand, it does not lead to any serious changes in its cost,” the source told.