Invest1 publisher3 min readPublished
Saudi Arabia shuts its Hormuz workaround after drone attacks launched from Iraqi soil
The East-West pipeline had been carrying more than double the Red Sea export volume it moved before the Iran war, and on Friday Saudi Arabia stopped it. Riyadh says it will not retaliate, and Trump says the Houthis called.
The Investor · Invest desk
What happened
- Saudi Arabia shut down its major cross-country oil pipeline on Friday, describing the halt as a precautionary measure after the attacks on it.
- Yemen's Iran-backed Houthis seized a key island and captured the Red Sea port city of Mokha, which Fortune, citing analysts, reports will complicate shipping and lift oil prices.
- Trump, speaking in Dublin, said Iran was probably behind the attack, and said the Houthis had called his administration and were letting most ships go through.
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Why it matters
- constraint Both Saudi export options now carry interruption risk at once: Hormuz shipping disrupted since February, and a Red Sea route whose terminus volumes had more than doubled and where the Houthis now hold a port and an island.
- decision By declining to retaliate, Riyadh has made the security of its own export line depend on an Iraqi investigation. Buyers of Saudi crude are pricing a provincial personnel decision in Maysan.
- exposure Red Sea shippers are relying on Houthi restraint that Trump described from talks he would not date, and the White House did not respond to questions about their timing.
- cost Overland Iran-Iraq trade stops at Shalamcheh and Chazabeh with no reopening date, so traders moving goods on that corridor absorb the delay.
The East-West line has been carrying Saudi Arabia's exports since Feb. 28, when the U.S. and Israel attacked Iran and Hormuz shipping was disrupted [5][17]. The International Energy Agency says exports through the Red Sea port at the pipeline's end have more than doubled since the war began [6]. So the flow halted on Friday was at least twice the pre-war volume on that route [22]. Riyadh called the halt precautionary [2].
The Saudi Foreign Ministry said several drones came from Iraq, and that the kingdom would not retaliate in order to give the Iraqi government "an opportunity to take the necessary measures" [3]. The measure so far is an investigation into the operations command in Maysan province and the dismissal of its commander, after Iraqi authorities determined the attacks were launched from a site there [4]. Iraq also closed the Shalamcheh and Chazabeh crossings with Iran to all passenger and commercial traffic until further notice, Iran's state media reported [7][8]. Tehran-backed Iraqi militias have been attacking U.S.-linked targets inside and outside Iraq since Feb. 28, and coordinating with the Houthis against Saudi Arabia [17]. The attacks have run 196 days to Saturday [21].
Asked in Dublin whether Iran was behind the attack, Trump said: "Well, I think they are. Probably they are. You know, they're on the balls of their feet right now. But I think they are." [12] He said his administration has "had discussions" with the Houthis, without saying when [13]. "The Houthis called us, and they don't want to fight with us," Trump said. "They would much prefer not having us involved, and they're letting most ships go through." [14] On his recent call with the Saudi crown prince, he said "everything's going to work out fine and dandy" [15]. The White House did not immediately respond to Fortune's request for comment about the timing of the Houthi talks [16].
Crude cleared $100 a barrel again this week, and Fortune's account says that gives Tehran more leverage in any talks [11]. It is the only price figure in the account, and tanker rates and war-risk premiums are not in it [23]. Fortune, citing analysts, reports that the Houthi seizure of Mokha will complicate Red Sea shipping and push oil prices higher [10].
The pipeline restarts within days, and the move above $100 was a scare about a route with the barrels intact. Or the Maysan dismissal stops the launches, Saudi restraint turns out cheap, and Iraq pays for it at two closed crossings. Or Mokha becomes a place to stop ships, and the volume that moved onto the Red Sea route has no uncontested path left.
I'd weight the third case. The responses on the record are a precautionary shutdown, a dismissed provincial commander, two closed border crossings and undated talks with the Houthis [2][4][7][13]. On Saturday, Iran's Masoud Pezeshkian and the UAE's Sheikh Mohamed bin Zayed Al Nahyan met on the sidelines of the BRICS summit in New Delhi, and a UAE statement said they discussed de-escalation and stability [18]. Praveen Donthi, senior analyst with the International Crisis Group, said Iran and the UAE "have shown diplomatic sagacity to make use of this rare opportunity for a direct meeting" [19]. Saudi Arabia's answer to a strike on its main export line was to switch the line off and wait for an Iraqi investigation [2][3].
What would prove this wrong is crude settling back below $100 while the pipeline stays shut. That would mean buyers are treating the outage as an inventory question and the export path as intact.
What to watch
- Whether Saudi Arabia announces a restart of the East-West pipeline, and at what throughput.
- Whether Baghdad's Maysan investigation identifies who launched the drones, and whether Shalamcheh and Chazabeh reopen to commercial traffic.
- Whether the White House dates its Houthi discussions or reports any measure covering Red Sea traffic.