Bypassing Hormuz, but not the flames of war! Saudi Arabia's oil "bypass artery" severely damaged, Brent crude oil approaches $110.

Title context: Bypassing Hormuz, but not the flames of war! Saudi Arabia's oil "bypass artery" severely damaged, Brent crude oil approaches $110. Text: As the latest geopolitical dynamics show the shutdown of Saudi Arabia's east-west oil pipeline, Houthi advances along the Red Sea, and the postponement of temporary shipping talks in Hormuz, market expectations for a recovery in Middle Eastern oil exports have been jointly weakened. After Asian markets opened on Monday, the international crude oil benchmark Brent crude November futures opened sharply higher and rose 3.6%, forcefully breaking through $108 per barrel; WTI crude October futures rose 2.8% to $102.87 per barrel, and shortly afterward broke through $103 per barrel. Using the last trading day before the war broke out February 27, when Brent and WTI crude near-month futures settled at $72.48 and $67.02 as the baseline, the two have surged by about 48.8% and 53.5%, respectively. The core logic behind this sharp rise in crude oil and refined product prices is that navigation through Hormuz, which is critical to 20% of global energy supply, has not yet returned to normal, while the Saudi-led Mandeb Strait energy transportation system and other shipping and onshore pipelines outside the Strait of Hormuz that serve as alternative export routes for Middle Eastern Gulf oil and gas producers have successively been interrupted by Houthi military strikes. The market needs to reassess the volume of deliverable oil and natural gas and the time needed for recovery. Undoubtedly, in the Middle East, military and diplomatic risks are compounding. Official communications from Saudi Arabia and Iraq say that the drones that attacked the east-west pipeline came from Iraqi territory, and the pipeline attack cannot be directly attributed to the Houthis or to a certain government army; at the same time, Yemeni government sources say the Houthis have occupied Perim Island in the Mandeb Strait, and their advance along the coast and attacks on Saudi Arabia further increase shipping risks in the Mandeb Strait and the entire Red Sea region. In addition, the meeting between Iran and Gulf states originally scheduled for Monday has been postponed, and the proposed temporary shipping arrangement has not yet become a confirmed guarantee of navigation. The United States continues to pressure Iran through a port blockade, and Trump has also raised the idea of possibly staying in Iran and "retaining or acquiring Iranian oil," but this is a political statement and geopolitical bargaining rhetoric, and does not mean that an executable agreement or new supply arrangement has been formed. The "de-Hormuz" corridor plan is damaged, and the oil market has begun pricing in a deeper supply gap U.S. Treasury Secretary Bessent recently said that with the development of alternative routes such as onshore oil pipelines, the Strait of Hormuz will be bypassed within two years, emphasizing that the construction of Middle Eastern oil pipelines, natural gas pipelines, and other important transport ports will bypass the Strait of Hormuz "within two years," and even saying that by then it will become a "worthless body of water." However, the reality is that the east-west oil pipeline that Saudi Arabia has led in building already an important Saudi export route bypassing the Strait of Hormuz has been hit hard by armed forces, and shipping volumes in the Mandeb Strait have plummeted compared with transport volumes before the Iran war. The east-west pipeline built by Saudi Arabia at enormous expense that is, crude oil transshipped via the pipeline to Yanbu has recently been about 4 million barrels per day. However, the actual situation is that after a new round of intense Houthi pressure, Yanbu inventories are expected to sustain exports for only 5 to 7 days, meaning that vital Mandeb Strait shipping has nearly come to a standstill compared with before the war broke out. If the shutdown continues until inventories are insufficient to support loadings, about 4% of global energy supply could be threatened. The pipeline was "preventively shut down after the attack, with the extent of damage and timing of resumption unknown." Geographically, after loading at Yanbu, the route north to the Suez Canal does not need to pass through the Mandeb Strait, while the route south toward the Indian Ocean still faces Mandeb risk; but whichever sea route is chosen, it cannot fully replace 100% of the east-west pipeline's function of transporting crude oil to Yanbu. Market pricing already reflects tighter near-term supply: the backwardation between Brent's two nearest monthly contracts has widened from $3.84 per barrel a week ago to $5.53, an increase of $1.69, or about 44%, meaning buyers are willing to pay a higher premium for crude delivered earlier, but this does not guarantee that far-month oil prices will necessarily follow higher. For stock market investors, the degree to which the energy sector benefits depends on whether companies can maintain production, transportation, and sales producers with stable export routes are more likely to realize the gains from high oil prices, while companies whose facilities are attacked or forced to cut output may see sales losses offset the price benefit. If the energy shock persists, it will also transmit to global stock markets through consumer purchasing power, corporate costs, and inflation expectations, increasing pressure on central banks to tighten policy further. Opportunities and risks in energy stocks will become more differentiated, and the discount-rate pressure on high-valuation AI-focused technology stocks that rely on external financing may also intensify. The vital backup oil artery has halted, and the global energy crisis is escalating again! The shutdown of Saudi Arabia's oil pipeline intensifies the energy crisis Saudi Arabia shut down a major crude oil pipeline after an attack, cutting off a transport route used during the U.S.-Iran war to bypass the Strait of Hormuz, intensifying global energy supply tightness and driving oil prices higher. Global benchmark Brent crude, after rising nearly 9% last week, moved further toward $108 per barrel, while West Texas Intermediate crude jumped to break above $103. European natural gas prices also rose, gaining as much as 3.8% at one point. Saudi Arabia said late last Friday that, after an attack the previous day, it had stopped operating the east-west oil pipeline as a precaution. There is still no indication of when operations will resume. June Goh, senior oil market analyst at Sparta Commodities, said: "Ultimately, the key is duration." She said that if transport can be restored quickly, the impact should be limited because inventories at Yanbu, at the western end of the pipeline, can be used. But she added that a prolonged shutdown could force Saudi Arabia to cut production. Diplomatically, Omani Foreign Minister Badr Albusaidi said that a meeting between Iran and several Gulf states originally scheduled for later on Monday has been postponed. The meeting was intended to discuss establishing a temporary shipping channel through the Strait of Hormuz. Earlier, Bahrain said it would not participate, partly because of the attack on the east-west oil pipeline; Axios reported that Saudi Arabia also has reservations about the plan. Traders are also assessing the regional impact of the rapid advance of Iran-backed Houthi forces along Yemen's Red Sea coast. This offensive could give the group greater control over shipping through another important maritime chokepoint the Mandeb Strait. As the U.S.-Iran conflict spreads across the region, restricting exports and disrupting shipping markets, crude oil has risen by more than 70% so far this year. As Tehran and the U.S. Defense Department in Washington vie for control of the Strait of Hormuz, the east-west oil pipeline has become an important channel for maintaining export flows. This protracted crisis has brought an inflation shock to the global economy, driving up prices for crude oil, natural gas, and petroleum products such as gasoline and diesel. U.S. CPI inflation data released last week showed that headline U.S. CPI inflation rose further in August, increasing the likelihood that the Federal Reserve will announce rate hikes at its September policy meeting and again in October. After discovering that the attack on Saudi Arabia's important oil pipeline was launched by armed forces from Iraqi territory, Iraq has also taken action. Iraq's prime minister ordered an investigation to contain the aftermath of the attack. The pipeline has a peak transport capacity of about 7 million barrels per day, carrying oil across Saudi territory to Red Sea ports. In the United States, Treasury Secretary Scott Bessent said last week that he would announce sanctions on a major bank on Monday as one of the measures to force Tehran to submit. At the same time, the U.S. Navy is imposing a blockade on Iranian ports to curb its energy exports. Market indicators show that concerns about near-term supply are deepening. Brent crude's near-month spread the price difference between the two nearest contracts is in backwardation of $5.53 per barrel, up from $3.84 a week ago. This is a bullish price structure, in which nearer-month contracts are priced higher than the contract immediately following. In terms of specific energy price moves, during Asian trading at 6:27 a.m. Singapore time, Brent crude futures for November delivery rose 3.1% to $107.85 per barrel; West Texas Intermediate crude, or WTI crude futures, for October delivery rose 2.8% to $102.87 per barrel.