Houthis Claim Missile Strike on Saudi Arabia's Largest Refinery, Pushing Brent to $115.69 and Reviving Fears for Gulf Oil Supply

The war in the Middle East has once again reached the heart of the world's oil industry. Yemen's Houthi rebels said they had struck Saudi Arabia's largest oil refinery with a missile, sending crude prices higher and reviving fears about the security of Gulf energy supplies.

The Houthis said on Tuesday that they had hit the refinery, which has a capacity of 550,000 barrels per day, according to Reuters reports carried by Business Recorder on Wednesday, October 28. Saudi authorities had not immediately confirmed the strike, and no details of damage were available.

Prices jump

Brent crude, the international benchmark, rose $1.81, or 1.6%, to $115.69 a barrel by mid-morning in New York on Wednesday. US West Texas Intermediate crude gained $2.52, or 2.5%, to $102.42.

The increase pushed Brent back into overbought territory, a technical indicator suggesting prices have risen sharply, for the fourth time in five days.

"Crude futures once again pricing in nearer-term tighter supplies on news the US is likely to re-start military operations soon," said Dennis Kissler, senior vice president of trading at BOK Financial.

A conflict without end

The attack is the latest in a series of strikes by the Iran-backed Houthis on Saudi Arabia. Earlier this month, an attack on Riyadh's King Khalid International Airport killed 13 people, prompting Indian and other airlines to suspend flights to Saudi cities. The Houthis also attacked Aden airport in Yemen on Wednesday, according to government officials, after warning people to evacuate.

Diplomatic efforts to end the wider war have made limited progress. Qatari mediators presented Iran with a new draft deal, but a senior Iranian official said Doha had only put forward unacceptable ideas. Qatar, along with Pakistan, has led mediation efforts, and Tehran's response is expected by the end of the week.

Several analysts expect renewed US strikes on Iran sometime after the US midterm elections on November 3.

Other supply factors

Supply worries were compounded by data from the US Energy Information Administration showing a surprise draw of 1.9 million barrels in US crude inventories for the week ended October 23, against forecasts of a 15,000-barrel build.

China issued a fourth batch of fuel export quotas for gasoline, diesel and jet fuel, bringing its 2026 total in line with 2025. Russian crude exports from Baltic and Black Sea ports could fall next month as domestic refiners increase diesel output.

OPEC+ is expected to keep its December production targets unchanged at a meeting on Sunday. Most core members are already producing below their targets, limiting the group's ability to offset disruptions.

Why refineries matter

Attacks on refineries affect not just crude oil markets but also supplies of refined products such as diesel, gasoline and jet fuel. Saudi Arabia exports large volumes of refined products, and any disruption to its refineries can tighten global product markets, raising prices for consumers even if crude supplies are unaffected.

Refining margins have already surged this year because of disruptions in the region, boosting profits for refiners elsewhere, including in India.

What it means for India

India is among the countries most exposed to higher oil prices, importing most of the crude it consumes. The Sensex fell 353 points on Wednesday as Brent rose, and the rupee weakened to 95.23 per dollar.

Higher crude prices widen India's trade deficit, raise inflation and increase pressure on public finances, particularly if the government continues to shield consumers from fuel price increases. State-run fuel retailers have absorbed large losses on marketing petrol and diesel at controlled prices, though high refining margins have provided some offset.

India has diversified its crude sources in recent years, buying more from Russia, the United States and other suppliers, which has helped maintain supplies during the crisis. But the country remains highly vulnerable to sustained high prices.

The energy transition angle

The repeated disruptions to Gulf energy supplies have strengthened the case for energy security through diversification, including renewable energy, electric vehicles and strategic reserves. India plans to hold a major renewable energy summit in New Delhi in early November, where the government will seek to attract an estimated $220 billion in clean energy investment between 2027 and 2030.

The Red Sea and shipping

The Houthis, who control much of northern Yemen, have repeatedly targeted shipping in the Red Sea and attacked energy infrastructure in Saudi Arabia. Their attacks on shipping have forced many vessels to avoid the Suez Canal and take the longer route around Africa, increasing shipping costs and transit times. A strike on a major refinery adds to concerns that the conflict could disrupt not only crude supply but also refined products such as diesel and jet fuel.

Refined products and inflation

Disruptions to refining capacity can push up prices of refined products more than crude oil, widening refining margins. Higher diesel and jet fuel prices feed directly into transport costs, airline fares and the prices of goods, adding to inflationary pressures in economies already dealing with high energy costs. Central banks, including the Federal Reserve and the Bank of Canada, have cited energy prices as a key factor in their latest decisions.

Saudi Arabia's response

Saudi Arabia has invested heavily in air defences to protect its energy infrastructure since a major attack on Abqaiq and Khurais in 2019 temporarily knocked out about half of its oil output. The kingdom's ability to restore production quickly after that attack reassured markets. Its response to the latest strike, and the speed with which the refinery returns to normal operations, will shape how much of a lasting effect the attack has on prices.

What comes next

Oil markets will watch for confirmation of the extent of damage to the Saudi refinery, the outcome of diplomatic efforts with Iran, and any US military action. The OPEC+ meeting on Sunday and US inventory data will also influence prices. For consumers and governments, the latest attack is a reminder that energy prices will remain volatile as long as the conflict continues. Energy analysts will also track how quickly the damaged refinery resumes normal operations, whether shipping insurance costs in the region rise further and whether producers elsewhere step in to offset any lost supply of refined products.

Indian refiners and importers, which rely heavily on Middle Eastern crude, will be among those most closely following events, as any prolonged disruption could raise their costs and affect fuel prices across the country.