Saudi Arabia has been forced to shut down its crucial East-West oil pipeline following a drone attack linked to militants based in Iraq, a development that threatens to disrupt global oil supplies amid ongoing regional tensions. The pipeline, which transports crude across the country to bypass the Strait of Hormuz, has played a key role in stabilizing oil markets since the onset of the conflict in the region.

The International Energy Agency (IEA) highlighted the pipeline’s importance, noting that alternate routes through it offset nearly 20% of the oil supply lost during the closure of the Strait of Hormuz in July and August. Prior to the recent attack, Saudi Arabia had already reduced output through the pipeline due to increased threats from Houthi forces targeting shipping in the Red Sea. In August, exports from Saudi Arabia’s Yanbu port on the Red Sea coast fell to 2.9 million barrels per day, down from an average of 5 million barrels daily earlier in the year.

With the East-West pipeline out of commission, Saudi Arabia may have to rely on a maritime shuttle system to move its crude through the Strait of Hormuz, a narrow and strategically sensitive chokepoint. Abu Dhabi National Oil Company (Adnoc) has been using convoys of oil tankers, protected by U.S. naval forces, to transport crude at night through the strait. Once past the area, loads are transferred ship-to-ship in the Gulf of Oman to avoid further risks.

Tracking volume through the shuttle system remains difficult as many vessels deactivate their transponders. Nonetheless, commodity traders estimate that up to 9 million barrels of crude and refined products may be transported daily by this method. The shuttle operation is costly, with fees reaching $16 to $20 per barrel to cover crew, vessel owners, and the elevated insurance premiums—sometimes as high as 10% of cargo and vessel value. Additionally, the availability of ship-to-ship transfer equipment is tightening, further complicating logistics.

Despite these challenges, Saudi Aramco’s well-established capability for rapid repair and extensive local supply chains could expedite the restoration of pipeline operations. According to Rebecca Schulz, senior oil analyst at the IEA, about 70% of Aramco’s operational inputs such as chemicals, pipes, and wellheads are sourced domestically. This contrasts with neighboring countries like Iraq and Kuwait, which depend more heavily on imported equipment and international service providers.

Analysts underscore the vulnerability of Saudi Arabia’s energy infrastructure amid escalating attacks, emphasizing the kingdom’s vital role in the global oil system. Brent crude prices surged to $132 per barrel this week, up from $90 at the end of August, reflecting growing market concerns. At the same time, the Saudi government faces considerable pressure to restore output, as oil export revenues account for approximately 55% of its total income. In the second quarter alone, Aramco delivered roughly $50 billion to the state in royalties, dividends, and taxes.

With militants having effectively disabled Saudi Arabia’s key alternative export route, reliance on the strait appears to be the kingdom’s immediate path forward to maintain its crucial role in global energy markets.