The US war on Iran is disrupting oil production and shipping routes across the Middle East, tightening global crude supplies and pushing energy prices higher as the conflict increasingly affects major production and export corridors.
Saudi Arabia's crude oil production plunged to 6.24 million barrels per day in August, its lowest reported level since 1990, according to data the kingdom directly reported to OPEC.
Saudi production fell by around 1.9 million barrels per day from 8.1 million barrels per day in July, reversing a sharp recovery from 7.1 million barrels per day in June. The decline came despite plans by Saudi Arabia and other OPEC+ members to increase output during the month.
The impact of the war has extended beyond the immediate conflict zone, affecting both the Gulf and alternative export routes through the Red Sea.
Saudi Arabia has relied heavily on its western export infrastructure, particularly the Red Sea port of Yanbu, as instability around the Strait of Hormuz complicated traditional Gulf shipping routes.
That alternative corridor has also come under pressure after Yemen's Houthi group declared a maritime embargo against Saudi Arabia on July 20, describing it as a new front in the conflict involving Iran and the United States.
The group subsequently claimed attacks on Saudi-linked vessels and energy facilities, including infrastructure around Yanbu and the Jazan refinery. Tankers have responded by switching off their Automatic Identification System signals to reduce exposure to attacks.
Ship-tracking data showed a sharp deterioration in Red Sea flows during August, with Saudi crude and condensate loadings from Yanbu falling to a six-month low. Vortexa estimated August loadings at 3.2 million barrels per day, while Kpler put them at 1.5 million barrels per day.
Shipping through the Strait of Hormuz has also come under pressure. Vessel transits through the waterway fell to just seven on Wednesday, compared with a 10-day average of 14, according to preliminary ship-tracking data.
Despite the fall in production, Saudi Arabia supplied 7.1 million barrels per day to the market in August, according to its direct communication with OPEC, significantly above its reported production of 6.24 million barrels per day.
The disruption has contributed to tighter global crude supplies and higher oil prices. Brent crude climbed above $100 per barrel this week as renewed fighting between the United States and Iran and attacks on shipping heightened concerns over Middle Eastern energy supplies.
Further sign of the impact
By Friday, Brent futures stood at $106 per barrel as of 0800 GMT, while West Texas Intermediate traded at $101. Crude oil prices had risen by around 10 percent on a weekly basis.
In a further sign of the impact on consumers, diesel prices in the United States exceeded $6 per gallon for the first time, reaching $6.05 on Friday, according to American Automobile Association data.
The energy shock has also weighed on financial markets. Asian shares declined on Friday, tracking Wall Street losses, while oil prices continued to rise.
Japan's Nikkei 225 dropped 2.8 percent, South Korea's Kospi lost 2.3 percent, Hong Kong's Hang Seng fell 0.8 percent, China's Shanghai Composite declined 1.8 percent, and Australia's S&P/ASX 200 fell 1.2 percent.
Higher energy prices have also added to inflationary pressures. US producer prices rose 5.4 percent year-on-year in August, accelerating from 4.8 percent in July, while US Treasury yields have remained above pre-war levels amid concerns over energy prices, inflation and rising government debt.
Diplomatic efforts are meanwhile expected to focus on keeping energy shipping routes open. Iran and Gulf states are expected to meet on Monday in Oman to discuss a temporary arrangement for managing shipping through the Strait of Hormuz.
Meanwhile, Yemen's western coast has seen rapid military developments, with media reporting Houthi advances on several fronts towards areas near Mocha and the Bab al Mandeb Strait.
With disruptions affecting production, the Red Sea and the Strait of Hormuz, the US-Iran war is increasingly placing pressure on the global oil sector, with continued fighting and shipping risks keeping crude prices elevated.
