The ongoing conflict in the Middle East has evolved from an initially brief disruption into a prolonged and volatile challenge for the global oil market. Recent developments such as the expansion of hostilities into Yemen and a series of drone attacks on a crucial Saudi oil pipeline underscore the increasingly complex risks to energy supplies.

Crude oil prices have climbed back above $100 a barrel as markets brace for a drawn-out period of uncertainty. This marks a change from early 2026 when officials, including U.S. President Donald Trump, anticipated the conflict would last only weeks. Last week, Trump acknowledged the fighting could extend beyond the U.S. midterm elections in November, signaling a shift in expectations.

The southern entrance to the Red Sea, via the Bab el-Mandeb Strait, has become a focal point. Yemen’s Iran-aligned Houthi militants have tightened control over this strategic shipping lane in recent days. The group maintains a naval blockade, although it has stated that all vessels except those belonging to Saudi Arabia are allowed safe passage. The strait is critical for the movement of oil and goods between Asia, Europe, and the Americas.

At the same time, Saudi Arabia’s East-West oil pipeline, which runs roughly 1,200 kilometers from the kingdom’s oil fields to its Red Sea coast, was temporarily shut down following multiple drone strikes launched from Iraq. The pipeline serves as a vital alternative export route bypassing the Strait of Hormuz, which has seen significant disruptions since the conflict escalated in February. Saudi authorities have reported damage to at least one pumping station, though the full impact and timing for repairs remain unclear.

During the early months of the war, Saudi Arabia increased oil exports via the East-West pipeline to four to five million barrels per day (bpd), helping to offset losses caused by restricted flows through Hormuz. However, shipments had dropped to around two million bpd by August, the lowest since January, amid the Houthi blockade. Production in Saudi Arabia also declined, with output falling to six million bpd in August, its lowest level in more than 30 years, according to the International Energy Agency (IEA).

Global crude oil inventories have been steadily depleted since the conflict’s onset, shrinking by approximately 507 million barrels, or about 2.8 million bpd. While some crude exports through Hormuz have resumed under tight US Navy supervision and alternative shipping routes along Oman’s coast, volumes remain well below pre-war levels. Satellite data and maritime monitoring suggest that Iranian strikes on tankers navigating the Strait of Hormuz or the Gulf have heightened the risks to maritime traffic.

Refined products are experiencing even sharper shortfalls, with exports from the Middle East nearly 60% below pre-conflict levels. This has contributed to widespread fuel shortages—particularly diesel—pushing prices to record highs worldwide.

With the Middle East responsible for roughly one-fifth of global oil supplies before the conflict, a sustained reduction in exports poses significant challenges. The combination of maritime risks, infrastructure attacks, and shrinking inventories points to a prolonged period of heightened volatility and uncertainty in energy markets. Any further disruption to Saudi Arabia’s Red Sea exports could exacerbate pressures on global fuel inventories and shipping routes, underscoring the precarious nature of the current situation.