Saudi Arabia shuts key oil pipeline after drone attack launched from Iraq

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How Houthi gains in Yemen could drive up oil prices

Saudi Arabia has closed a critical oil pipeline after it was attacked by drones launched from Iraq, as conflict in the Middle East widens.

Iraq said it had fired a military commander and launched an investigation after admitting the drone attack on its neighbour's East-West pipeline had originated in one of its provinces bordering Iran. Saudi Arabia has previously accused Iran-backed militia in Iraq of targeting its oil facilities.

The 1,200km (745 mile) pipeline has helped Saudi Arabia - the world's largest crude oil exporter - bypass the Strait of Hormuz.

The incident comes amid a major advance by the Iranian-backed Houthi rebels in Yemen, putting more pressure on global oil shipping routes as the US-Iran war stretches into its seventh month.

On Friday, Yemen's Saudi-backed government forces said they had struck Houthi fighters in the strategic coastal city of Mokha, a day after the Houthis seized control of the entire Red Sea coast.

Riyadh on Friday said it had shut the pipeline as a precaution, as satellite images of scorched ground and smoke near the site emerged.

The foreign ministry said the attack resulted in some injuries and damage, which was still being assessed.

Saudi Arabia has chosen not to retaliate at this stage, its foreign ministry says, following a call from Iraq's prime minister.

It said the kingdom would "support the efforts of the Iraqi government" to "prevent attacks" launched from the country against neighbouring states.

Lightning Houthi advance in Yemen may bring dangerous new dimension to Iran war

Published1 day agoImage source, Planet Labs PBCImage caption, Satellite images show images of the area where the East-West pipeline was hit before (left) and after

"The Kingdom of Saudi Arabia affirms that it reserves its right to take all necessary measures to safeguard its sovereignty and security, protect its facilities, and ensure the safety of its citizens and residents," the statement added.

The Iraqi prime minister's office in its own statement said the operations commander in the Maysan governorate - a province which borders Iran - had been removed from his post following confirmation the drone attack had been launched from that region.

Saudi Arabia has previously carried out strikes alongside the US against Iran-backed militias in Iraq after accusing the groups of launching drones from Iraqi territory at oil facilities.

The Gulf Co-operation Council – made up of representatives from Saudi Arabia, the United Arab Emirates, Bahrain, Oman, Qatar and Kuwait – also issued a statement condemning the attack.

"This attack represents a dangerous escalation and an unacceptable threat to the security of the Kingdom of Saudi Arabia, its territorial integrity, and its vital installations, as well as a flagrant violation of the principles of international law," secretary general Jasem Mohamed Albudaiwi.

This week, a lightning advance in Yemen has also seen Houthi militants seize control of much of the country's coastline, sources say.

The group said it had control of the Bab al-Mandab Strait, the gateway to the Red Sea and the Suez Canal, though it said maritime navigation is "safe for all companies except for Saudi vessels".

The Yemeni Armed Forces have since struck back. On Friday, spokesman Majid al-Nuzaili said they had targeted Houthi positions in and around the city of Mokha, adding that they had destroyed vehicles and weapons and killed a number of Houthi fighters.

The strategic coastal city on the Red Sea is situated about 80km (50 miles) north of the Bab al-Mandab Strait. The Houthis seized control of Mokha on Thursday. Their attack drove many people to flee to Aden, where Yemen's internationally recognised Presidential Leadership Council and government are based.

Local sources also reported that government forces carried out air strikes targeting Houthi forces in Taiz governorate, which is along the Red Sea coast, and Ibb governorate, which neighbours Taiz.

On Saturday the UN said at least 76,000 people had been displaced in Yemen since July, with the number quadrupling in the past week. It warned of a "rapidly worsening displacement crisis in Yemen unfolding by the hour".

"Entire families are on the move, often at night. They have nowhere safe to go... They are exhausted. Their resources are gone. Most fled with nothing but the clothes on their backs," the UN statement said.

The developments have squeezed both sides of the Arabian Peninsula, pushing crude oil prices to over $100 a barrel for the first time since July.

Fears over inflation have risen with the spike in energy prices, further pushing up government borrowing costs.

"The buffers that have helped the oil market manage the crisis so far are mostly gone. So oil prices will keep rising if both crises continue," he said.

Challenges were particularly acute in diesel markets, he said, where prices have already reached record levels that would in turn push up the costs of a range of goods as diesel is widely used in manufacturing and transportation.

"Unless the situation across the Middle East improves, crude oil prices are likely to return to the peak of $120 per barrel seen earlier in the Iran war and could go even higher," he said.

Additional reporting by Meghan Owen

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