Gulf oil supply disruptions escalate as Saudi Arabia, Iran and Gulf states try to arrange a truce over shipping

Oil markets moved sharply again on Monday as a months-long conflict centered on Iran continued to disrupt one of the world's most important energy corridors, even as diplomats worked toward a possible short-term fix.

The immediate trigger was a drone strike that hit Saudi Arabia's East-West pipeline last week, a route that had been used to move crude around the Strait of Hormuz while that narrow waterway remained constrained. Saudi Arabia shut the pipeline as a precaution, and by Monday there was no word on when it might reopen. Over the weekend, new Houthi strikes on Saudi Arabia and reported Iranian actions against ships in the Gulf added to the pressure. Brent crude rose more than 2 percent to above $107 a barrel, capping a run that has taken prices up roughly 8 to 9 percent over the past week alone and above $100 a barrel for the first time since July.

The disruption traces back to a conflict that began in late February, when American and Israeli strikes targeted Iranian nuclear facilities and military infrastructure, setting off months of retaliatory strikes, ship attacks and airspace closures that have required repatriation flights for tens of thousands of people across the region. On Monday, the story was as much about diplomacy as damage. Gulf Cooperation Council diplomats met their Iranian counterparts in Oman to discuss a possible temporary arrangement for managing shipping through the strait, and Iran's foreign ministry said Saudi Arabia had asked to postpone part of those talks. Separately, Iran said it was blocking its own nuclear chief from traveling to a conference in Vienna and blamed the United States, summoning Austria's ambassador over the matter. President Trump said Monday that Iran wants to reach a deal to end the conflict and predicted a rapid decline in fuel costs once hostilities stop.

The energy fallout is being felt well beyond the Gulf. The International Energy Agency sharply cut its 2026 global oil demand forecast, pointing to a contraction of roughly 2.5 million barrels a day, which it called the steepest annual decline since the pandemic, while warning that demand could weaken further if the conflict drags on. OPEC has cut its own demand growth forecast for five consecutive months. European natural gas prices also rose as traders weighed the risk of a longer disruption.

Monday's Oman talks between Gulf states and Iran are the most concrete near-term chance for a shipping arrangement; traders are also watching whether Saudi Arabia's pipeline comes back online and whether this week's Federal Reserve meeting responds to the resulting inflation pressure.

Why did oil prices jump again?

A Saudi pipeline that had been used to route crude around the Strait of Hormuz was shut after a drone strike, and new strikes over the weekend added to worries about Gulf supply.

Is there a diplomatic effort underway?

Yes, Gulf Cooperation Council diplomats met Iranian counterparts in Oman on Monday to discuss a possible temporary arrangement for shipping through the strait.

Back to today's brief →