News reports this week indicated Saudi Arabia was cancelling or delaying multiple shipments of crude to European refiners for the month of September, pushing them into October or even November.
So, after a seeming reprieve, global oil markets are once again showing increasing signs of stress from fresh disruptions to oil infrastructure in the Middle East. The Saudi move followed an attack last week on its East-West pipeline that Riyadh blamed on drones from Iraq. Recent reports indicate the Saudis hope to have roughly half the capacity of the pipeline in a “few days,” while the restoration of full capacity could take up to six weeks, assuming no further attacks.
Compounding the perils of transit, Houthi rebels have taken control of the port of Mokha in Yemen and offshore islands in the Bab al-Mandeb, giving them a platform to harass shipping in the Red Sea. This shift, combined with the damage to a pipeline that was transporting an estimated 4-5 million barrels daily, has once again spooked markets that had been somewhat reassured by a partial restoration of flows through the Strait of Hormuz, through which roughly 20% of global oil supplies traveled before the war.
The escalation of hostilities in a new theater has led market-traded oil prices back most of the way toward the highs reached at the outbreak of the war more than six months ago. As of this writing, benchmark Brent crude is trading above $105 per barrel, up from $80 as recently as August 4.
As the market grapples with new shocks to oil supply, it has less robust buffers than it did in the early days of the war. Seaborne storage on tankers has been depleted, the U.S. Strategic Petroleum Reserve has released about 130 million barrels, and the world’s largest importer, China, is increasing imports to 7.2 million barrels per day, up from a low of 6 million barrels in June (and against prewar daily imports of almost 12 million barrels).
The impact on the prices of refined petroleum products has been particularly stark. The price of diesel in America has hit all time highs above $6 per gallon, reflecting not just the conflicts in the Middle East but also the war in Europe, where Russia and Ukraine have been exchanging strikes on each other’s energy infrastructure, hitting Russian refining capacity. Ben Cahill, a nonresident fellow at the Atlantic Council, estimated recently that seaborne refined product exports from Russia and the Middle East had fallen from roughly 8 million to 4 million barrels daily since February 2026.
The spike in diesel prices (particularly this close to the midterm election) has sparked some disagreements in Washington. Senate Majority Leader John Thune (R-S.D.) has suggested that he would be open to a ban on diesel exports, but critics have noted that such a step could just lead to lower refinery usage in the U.S., and thus potentially push up gasoline prices. Meanwhile, Energy Secretary Chris Wright appears more focused on measures that might increase supply, though it is unclear how quickly these could take effect, given that U.S. refineries are now running at 98% capacity. Meanwhile, American farmers are complaining bitterly about the increase in diesel prices, with some experiencing increased costs of up to $1,000 a day.
Still, for all the agitation in Washington over the economic and political consequences of the war, the brunt of the impact will be felt in the Global South, particularly among its poorest citizens. And some leaders there are not shy about pinning the war and its consequences squarely on Washington. Speaking at the BRICS summit, Malaysian Prime Minister Anwar Ibrahim blamed the “initial aggression of the United States, initially of course with Israel,” for the conflict.
Disruptions in the Strait of Hormuz have meant that countries in Asia now receive more of their fuel from Red Sea ports in Saudi Arabia; India reportedly receives 51% of its oil from that coast, with the Philippines now at 37% and Pakistan at 36%.
The spike in diesel prices is likely to hit countries in the Global South especially hard. The higher energy density of diesel means that it is used to power trucks, buses, and agricultural equipment, making it the most important fuel in poorer countries where individual ownership of automobiles is much less widespread. India, the world’s third-largest oil importer, consumes twice as much diesel as gasoline.
Similarly, South Africa has seen diesel usage overtake gasoline usage as a byproduct of gaps or failures in public infrastructure. Road transportation has increased as railways have become less reliable, and frequent power failures have meant increasing dependence on private diesel-fueled generators.
These factors are present across much of the Global South. At the level of individual households, the collapse in the price of solar panels has helped reduce the dependence on diesel generators as a backup for the vagaries of power generation, and cushioned some of the blow of higher fuel prices, most famously in Pakistan. Even so, distributed solar cannot power buses and agricultural equipment or run machinery in small and medium-sized enterprises.
The resurgence of conflict in the Gulf also has implications for fertilizer prices, impacting farmers around the world. In the U.S., the administration has been arguing that higher fertilizer prices reflect insufficient competition , but economists argue that the primary cause is a global supply shock resulting from the war in the Persian Gulf.
While the disruption of urea supplies was offset by increased production in Egypt and Nigeria, the price of phosphate (the production of which depends on sulfur from the Gulf) remains high , as noted by Michael Werz of the Council on Foreign Relations. Werz points out that prices could lead to farmers skimping on phosphate for a second straight season, potentially exacerbating food shortages in 2027. And all this is happening ahead of what could be the strongest El Nino phenomenon ever, threatening farmers across the Global South. The World Food Program projected in early August that almost 50 million more people could be pushed into acute hunger as a result of the weather pattern.
The consequences of this renewed escalation are another sign that this war of choice in the Middle East has had immense economic and human costs in the United States and overseas. The absence of a clear exit strategy — and indeed, even of coherent aims — has raised questions about America’s global preeminence as the waves of destabilization emanating from Washington are blowing back home.
With Mideast on fire, oil prices are poised to explode
Aggregated summary from an independent source. Read the original at ResponsibleStatecraft.