Oil markets reacted sharply on Tuesday after Saudi Arabia reported attacks on its energy infrastructure, pushing Brent crude—the international benchmark—to nearly $99 per barrel. U.S. crude oil also climbed more than 2.5%, approaching $94 per barrel, while wholesale gasoline prices rose 1.4%.
Details of the Attack
The state-run Saudi Press Agency attributed the attacks to the Houthi group, describing them as “terrorist” actions. The agency also reported that 73 civilians were injured in the assault. Saudi authorities condemned the Houthis’ attacks on commercial vessels in the Red Sea, west of the kingdom, and their “threats to freedom of international maritime navigation.” Saudi Arabia is the world’s largest oil exporter.
Escalating Regional Tensions
The latest incident follows U.S. strikes on Sunday against three Iranian oil tankers, one of which was sunk. These strikes came after Iran launched ballistic missiles toward U.S. Navy ships. The renewed hostilities have severely reduced traffic through the Strait of Hormuz, a critical chokepoint for global energy supplies. Only four ships passed through the strait on Saturday, with six on Sunday, compared to the pre-war average that carried over 20% of the world’s energy supply.
Meanwhile, vessel traffic in the Bab el Mandeb strait, between the Arabian Peninsula and northeastern Africa, saw a 16% decline from the previous week, according to MarineTraffic data. However, the more than 260 ships transiting last week still far exceeded the numbers seen in the Strait of Hormuz.
Impact on Fuel Prices
On Tuesday, the national average gasoline price held steady at $4.15 per gallon, though it has risen 6 cents from a week ago and 14 cents from a month ago. Diesel fuel hit its highest price ever on Friday, reaching $5.90 per gallon, according to AAA data, and has remained at that level since.
Since the onset of the conflict, Brent crude has surged 36%, and AAA’s national average gas price has jumped 40%. Year-to-date, Brent is up more than 62%.
Market and Political Reactions
The White House is closely monitoring oil prices as midterm elections approach. On Monday, President Donald Trump asserted in a social media post that “oil prices will drop precipitously, like everything else is dropping (but more!), when we WIN the war with Iran,” suggesting prices could fall to as low as “two dollars a gallon.”
Goldman Sachs commodities analysts warned of “significant” upside risk to prices, forecasting that if Persian Gulf oil flows remain constrained, “Brent might exceed $120.” They noted, “We view more intense shipping attacks in Hormuz and the Red Sea as the most likely driver of this lower-output, higher-price scenario.”
HSBC analysts echoed this sentiment, stating that if diplomacy fails and Hormuz flows stay near current levels, inventories could draw down to operational lows, pushing Brent to around $120. Their base case expects Brent to hover around $95 through the end of the year, with longer-term forecasts revised upward to $85 per barrel for 2027 and $75 for 2028 and beyond. Before the U.S.-led war against Iran began on Feb. 28, Brent traded near $70.
Broader Economic Effects
Higher oil prices have also influenced bond markets, with the benchmark 10-year yield nearing 4.80% on Tuesday, its highest level since early last week. Stock futures pointed to a largely flat open on Wall Street.
As the conflict continues, markets are increasingly pricing in a prolonged Mideast crisis, with energy prices and global economic stability hanging in the balance.