Oil prices surged on Monday as drone strikes forced Saudi Arabia to halt operations on its East-West crude pipeline, a critical bypass route that had been helping to offset ongoing constraints in the Strait of Hormuz. Brent crude climbed approximately 2.9% to $107.66 per barrel, while West Texas Intermediate (WTI) rose about 2.4% to $102.48.
The gains pushed both benchmarks back toward last week's highs and rekindled concerns that Brent could approach $120 if disruptions spread beyond Hormuz to alternative export routes. The Saudi pipeline, which runs roughly 1,200 kilometers from the kingdom's eastern oil fields to the Red Sea port of Yanbu, has become increasingly vital since U.S.-Iran tensions restricted shipping through the strait.
Pipeline's role in global supply
Saudi Arabia states the East-West pipeline can carry up to 7 million barrels per day at full capacity. However, before the latest shutdown, actual flows were closer to 4 million barrels daily—equivalent to about 4% of global supply. If repairs take longer than expected, Yanbu's inventories may only sustain exports for five to seven days, according to industry estimates.
This development alters the market calculus. Until now, pipelines in Saudi Arabia and the UAE were key arguments that a partial Hormuz closure would not automatically trigger a global supply crisis. Damage to one of those routes removes part of that safety valve, making the supply picture more precarious.
$120 scenario gains traction
Goldman Sachs has outlined a scenario where Brent could exceed $120 if attacks on Middle East shipping intensify and Gulf output remains significantly below pre-war levels. Daan Struyven, Goldman's co-head of global commodities research, told Bloomberg that widening shipping disruptions have become a materially greater risk. The bank recently raised its year-end Brent forecast, warning that a prolonged supply shock could push prices far beyond its base case.
HSBC has reached a similar conclusion. Analysts led by Kim Fustier raised the bank's 2026 Brent forecast to $90 from $80 and see a scenario where persistent disruption could lift crude toward $120. The key difference now is that this stress case is being tested while Brent is already near $108, not $90.
Diplomatic efforts stall
The supply shock is also becoming harder to offset politically. A planned meeting in Oman between Iran and Gulf states to discuss temporary shipping arrangements through Hormuz was postponed after regional governments failed to reach consensus. Local reports indicate Saudi Arabia had concerns about the proposal, while Bahrain declined to participate.
That leaves two major export routes under pressure simultaneously: Hormuz in the Persian Gulf and the Red Sea corridor linked to Yanbu and Bab el-Mandeb. The situation has also weighed on broader markets, with stocks sliding as oil tops $100 and inflation worries resurface.
Oil could retreat quickly if the Saudi pipeline restarts within days or diplomacy produces a workable shipping deal. But until one of those things happens, traders have fewer reasons to remove the geopolitical premium. For investors tracking the energy complex, the potential for $120 oil is no longer a remote tail risk but a scenario that could test market resilience.
Related coverage: Brent slips below $104 as Iran-Gulf talks loom and Brent nears $110 after weekly surge.
This article is for informational purposes only and does not constitute financial advice.
