Oil Jumps Above $110 as Houthi Attacks Hit Saudi Arabia and Iran Says It Struck Tankers in the Gulf

Oil prices climbed on Thursday, October 22, as attacks on Saudi Arabia and on shipping in the Gulf deepened fears that the conflict in West Asia could disrupt the world's most important energy-producing region.

Brent crude futures rose $1.29, or 1.2%, to $110.11 a barrel in early Asian trade, while US West Texas Intermediate crude gained 97 cents to $98.12, Reuters reported. Prices extended gains later in the day, with Brent trading above $112 a barrel by the Indian evening, according to Business Standard.

The move followed a series of attacks that brought the conflict closer to the heart of global oil production.

Attacks on Saudi Arabia

Houthi strikes on Wednesday killed at least one person and wounded eight at a civilian airport in Dammam, in Saudi Arabia's oil-rich Eastern Province. A drone attack on a Saudi oilfield killed two people, according to Reuters. The United States ordered some diplomats and their family members to leave its missions in the kingdom, and the State Department planned to withdraw family members from other regional missions, US officials said.

Saudi Arabia is the world's largest crude exporter, and its eastern oilfields and processing facilities are among the most critical pieces of energy infrastructure in the world. Any sustained disruption there would have a significant effect on global supply. In 2019, drone and missile attacks on the Abqaiq processing plant temporarily knocked out about half of Saudi production, sending prices sharply higher.

Iran claims strikes on tankers

Separately, Iran's Islamic Revolutionary Guard Corps Navy claimed it had struck and set fire to four oil-carrying ships in the northern Persian Gulf that had crossed what it called an "illegal route" despite warnings, according to Iranian state media. It also said three other vessels had hit mines in the western Strait of Hormuz on Wednesday night and been stopped.

The statement did not identify the vessels, their owners or details of damage or casualties. The IRGC blamed the United States for encouraging ships to use an "illegally mined passage" and warned that the confrontation could extend "to the aggressive bases in the region."

Kpler data showed at least 18 attacks on shipping over the past two weeks, Reuters reported. LSEG analysts warned that Iran was targeting tankers beyond the Strait of Hormuz, reaching the Gulf of Oman, and jeopardising Gulf crude loadings and ship-to-ship transfers.

The Hormuz chokepoint

The Strait of Hormuz, the narrow waterway between Iran and Oman, is the world's most important oil chokepoint. A significant share of global seaborne oil and a large portion of liquefied natural gas exports pass through it, much of it bound for Asian markets, including India, China, Japan and South Korea.

Threats to shipping in the strait raise not only the risk of supply disruption but also the cost of shipping, as insurance premiums for tankers rise and some shipowners avoid the area.

Diplomatic stalemate

Diplomatic efforts appear stalled. US President Donald Trump said on Wednesday that Washington was not negotiating with Iran and that "something" would happen "fairly soon," without giving details. Iranian President Masoud Pezeshkian told parliament: "The current situation is neither good for us, nor for the region, nor for the world." He told state media that the US could not expect dialogue while blockading and threatening Iran.

Iranian Foreign Minister Abbas Araqchi told the Financial Times that Iran was fully prepared to defend itself. The New York Times reported that the US and Israel had drawn up plans for renewed strikes on Iran after the US midterm elections, according to a report cited by Business Standard.

Supply data adds pressure

Market fundamentals added to the upward pressure. US crude inventories fell by 3.06 million barrels to 412.5 million barrels last week, according to the Energy Information Administration, a larger draw than the 820,000 barrels analysts had expected. Distillate stocks, which include diesel and heating oil, rose 1.68 million barrels.

The Trump administration offered to lend up to nearly a third of the 1-million-barrel US emergency heating oil reserve to contain diesel price spikes linked to the wars in Iran and Ukraine.

In a potential offsetting development, the Kremlin said President Vladimir Putin had agreed to resume US-mediated peace talks with Ukraine as soon as next month, after hosting US special envoy Steve Witkoff in St Petersburg.

The economic fallout

High oil prices ripple through the global economy. They raise costs for transport, manufacturing and agriculture, feed into consumer price inflation and reduce household spending power. Central banks facing persistent inflation may keep interest rates higher for longer, weighing on growth.

Energy-importing economies are hit hardest. In India, which imports nearly 90% of its crude oil, the Sensex and Nifty fell for a second straight day on Thursday and the rupee weakened to 94.83 per dollar. The 10-year government bond yield rose to its highest since November 2022.

Oil-producing countries and energy companies benefit from higher prices, but the risks to infrastructure and shipping in the Gulf create uncertainty for producers in the region as well.

Asia's exposure

Asian economies are the largest buyers of Gulf crude, making them particularly vulnerable to disruptions. China, India, Japan and South Korea together account for a significant share of oil exports from Saudi Arabia, Iraq, the UAE and Kuwait. Many of these countries maintain strategic petroleum reserves to cushion supply shocks, and India has built underground storage facilities as part of its emergency preparedness.

Governments in importing countries are also watching for effects on inflation. Several central banks in Asia have kept interest rates elevated or raised them to counter price pressures, and a further surge in oil prices could complicate efforts to support growth.

What comes next

The direction of oil prices will depend heavily on whether attacks on Gulf infrastructure and shipping escalate further, and on whether diplomatic efforts make progress. Traders will watch for any damage to Saudi production, the security of the Strait of Hormuz and the possibility of US military action.

For now, the market is pricing in a significant risk premium. As long as tankers and oilfields remain targets, prices are likely to stay elevated, with consequences for inflation, interest rates and growth around the world. For businesses and consumers, the effects will be felt at the fuel pump and in prices across the economy.