News (Europe Bureau) The global energy market is facing a new supply shock. As one of the world’s most important crude oil exporters, Saudi Arabia may face sharply limited crude export capacity in the coming days. With the Northern Hemisphere winter and harvest season drawing near, this situation is further stoking market fears of tight energy supplies and rising inflationary pressure.
Saudi Arabia announced the shutdown of its East-West pipeline last Friday. This pipeline had served as a key alternative route bypassing the Strait of Hormuz, whose shipping capacity has already been severely restricted amid ongoing conflicts between the United States, Israel and Iran. Saudi Arabia has not released a timetable for the pipeline’s resumption, and markets worry repairs may take far longer than previously expected. #IranCrisisTracking#
Up to 5 million barrels per day of exports face rerouting
Florence Schmit, Senior Energy Strategist at Rabobank, stated that with the East-West pipeline offline, roughly 5 million barrels per day of crude that Saudi Arabia previously exported via the Red Sea will have to be redirected to the PeRSIan Gulf and shipped through the Strait of Hormuz.
However, it remains unclear exactly how much crude Saudi Arabia can reroute in this way.
At the onset of the conflict, Saudi Arabia quickly adjusted its export routes, transporting crude produced mainly from oilfields in its eastern region through the East-West pipeline to Yanbu Port and nearby facilities on the Red Sea coast for loading and export.
In March this year, Saudi Arabia said it would lift the pipeline’s nominal capacity to a maximum of 7 million barrels per day, around 2 million barrels per day of which is reserved for domestic consumption. Before the war, the pipeline’s actual throughput stood below 1 million barrels per day.
Saudi Arabia still holds some crude stocks at Yanbu Port, yet inventories can only buffer the supply shock for a limited time.
Schmit said Yanbu inventories equal roughly one week of supply, so by next week the market will get a clearer picture of how tight supplies will become.
“Much will depend on how much crude can move through the Strait of Hormuz in the coming days, where shipments will likely remain intermittent,” she noted.
Shipping through the Strait of Hormuz remains highly unstable
It is hard to accurately measure the actual volume of crude oil flowing through the Strait of Hormuz at present.
Many tankers sailing through this strategic waterway turn off automatic identification signals such as GPS for safety and to evade Iranian attacks.
The US military has provided protection for some oil tankers sailing along Oman’s coast, and ship-to-ship transfers are becoming one important way to restore Middle Eastern crude exports.
Even so, the Strait of Hormuz cannot deliver stable, predictable export capacity. This means if the bypass route built by Saudi Arabia relying on the East-West pipeline is disrupted for a long time, the global crude market will once again become heavily dependent on the Strait of Hormuz.
Markets begin pricing in massive supply losses
Janiv Shah, oil analyst at Rystad Energy, said financial markets are “increASIngly pricing in the possibility of significant supply losses.”
“The broader Middle East conflict has already added a risk premium to crude prices, and the shutdown of Saudi Arabia’s East-West pipeline imposes another major constraint,” he stated.
Oil prices have responded relatively restrainedly to the news so far, indicating energy markets still expect Saudi inventories to act as a buffer in the short term.
But Shah warned market conditions could shift rapidly if the shutdown lasts beyond the 5 to 7 day inventory buffer window.
Rystad data shows crude and condensate loadings at Yanbu Port stood at roughly 2.6 million to 4 million barrels per day in early September. Loadings have fallen over the past three days, averaging around 2.6 million barrels per day over the last seven days.
Repairs may prove more difficult than previously thought
A pumping station on the East-West pipeline was attacked back in April this year. At that time, the system restored full throughput within seven days, so markets once treated that incident as a reference for the current shutdown.
Yet the current situation may be markedly different. Shah said latest satellite imagery shows damage may span multiple locations with far more extensive destruction, meaning restarting operations could take much longer. Even after repairs are completed, the full 746-mile pipeline will need pressure testing and all critical components rechecked and verified safe before meaningful throughput can resume.
The Saudi government has not officially announced the extent of damage or given a timeline for resumption.
Shah said the pipeline was struck by drone attacks launched from Iraq at multiple sites in the Riyadh and Medina regions, creating more complex operational challenges than a single-point strike.
The Associated Press previously cited two regional officials reporting that the East-West pipeline may be “out of service for weeks.”
Alternative Red Sea route also under pressure
While the pipeline was attacked, Iran-backed Houthi forces are expanding their control near the Bab el-Mandeb Strait in the Red Sea, effectively exerting stronger influence over this key waterway.
After an attack in July and Houthi forces declaring a maritime blockade against Saudi Arabia, Saudi activated another more expensive alternative export route via Egypt into the Mediterranean Sea. But this detour also relies on the East-West pipeline as its upstream transport channel.
Therefore, the closure of the East-West pipeline not only directly impacts Red Sea exports, but also weakens Saudi Arabia’s ability to reroute shipments through Egypt and the Mediterranean.
Saudi output had already fallen sharply before the pipeline outage
More alarmingly, Saudi crude production had already declined markedly before this pipeline shutdown.
OPEC data shows Saudi crude output plummeted by roughly 1.9 million barrels per day month-on-month in August to 6.24 million barrels per day, down around 23% from July.
In 2025, Saudi Arabia averaged about 9.6 million barrels of crude output per day, making it the world’s third-largest oil producer after the United States and Russia, with roughly two-thirds destined for export. Before the current conflict erupted, Saudi remained one of the world’s top crude exporters.
Accordingly, whether measured by ranking or actual export volumes, Saudi Arabia is a core node within the global energy supply system, and its export capacity is now facing clear constraints.
Oil prices have risen nearly 17% this month
Energy markets are already pricing in supply risks. London Brent crude futures closed up 1% on Monday (Sep 14) at $105.68 per barrel, with a cumulative gain of nearly 17% so far this month. Oil hit an intraday high of $109.80, posting gains in 9 out of the past 11 trading sessions.
Schmit said it is clear the current situation will continue to place upward pressure on energy prices.
Meanwhile, global refined product markets face greater risks, as refineries in the Middle East and Russia have already tightened amid shutdowns and supply disruptions.
Rising diesel prices may transmit inflation faster
Energy costs in the United States are also rising noticeably. The average retail price of US diesel hit a fresh high on Monday, while regular US gasoline stayed near $4.3163 per gallon, about 16 cents higher than one week ago. This trend is unusual. Normally after the peak US summer driving season ends, gasoline prices gradually start falling in September.
Eric Smith, Professor and Associate Director of the Tulane Energy Institute at Tulane UniveRSIty, said diesel price hikes usually transmit to inflation faster than gasoline.
“Diesel moves nearly everything we eat, consume and manufacture, while gasoline is mainly for personal passenger travel,” he explained.
That means if diesel prices keep climbing, the impact will quickly spread from transportation costs to food, manufacturing, retail and broader consumer prices.
Smith said markets may have been overly optimistic in assuming war-related energy shipping problems could be solved by bypassing the Strait of Hormuz.
“Pipelines are certainly a good solution, and the more the better. The problem is pipelines are eASIer to attack once you know where they are,” he said.
Judging from large burnt areas visible in satellite imagery, he believes repairs for the East-West pipeline “will likely not be straightforward.” If the outage lasts beyond the existing inventory buffer, Saudi crude export capacity will contract further and global markets may be forced to reprice Middle Eastern supply risks. At that point, higher oil prices will affect not only energy markets but also amplify global inflation pressure through diesel, transportation and food costs.