Oil market rises as U.S. diplomat withdrawal adds to Saudi security risk

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Oil market rises on Saudi risk

Highlights

Brent crude rises $1.29 (1.2%) to $110.11 and WTI gains 97 cents (1%) to $98.12 after U.S. diplomat withdrawal escalates Saudi security threats.
Yemen's Houthi attacks on Saudi infrastructure and at least 18 recent shipping incidents raise significant risk to Gulf crude exports and regional supply chains.
U.S. crude stocks drop 3.06 million barrels against an expected 820,000-barrel draw, while distillates unexpectedly rise, prompting release of emergency heating oil reserves.

Gulf attacks lift crude prices

As first reported by Reuters, Brent crude futures rise $1.29, or 1.2%, to $110.11 a barrel at 00:34 GMT, while U.S. West Texas Intermediate crude gains 97 cents, or 1%, to $98.12. Brent had settled largely unchanged on Wednesday, while WTI had eased 67 cents.

The U.S. State Department plans to withdraw family members from a number of other U.S. missions in the region, U.S. officials told Reuters. The move follows attacks by Yemen's Iran-aligned Houthis on Wednesday, including strikes that kill at least one person and wound eight more at a civilian airport in Dammam, as well as a drone attack on a Saudi oil field that kills two people.

Explosions are also heard in Sirik in southern Iran, with Iranian media saying the nature and origin of the blasts are unknown. On Wednesday, Iran's Foreign Minister Abbas Araqchi tells the Financial Times that Iran is fully prepared to defend itself, while President Masoud Pezeshkian says U.S. dialogue cannot be expected while Iran is being blockaded and threatened.

Shipping risks and supply signals shape outlook

There are at least 18 attacks on shipping over the past two weeks, Kpler data show, while LSEG analysts warn that Iran is targeting tankers well beyond the Strait of Hormuz and into the Gulf of Oman. That threat jeopardises Gulf crude loadings and ship-to-ship transfers that support regional exports.

Broader geopolitical developments are also in focus. Russian President Vladimir Putin hosts U.S. Special Envoy Steve Witkoff in St Petersburg on Wednesday for talks on ending the war in Ukraine, and the Kremlin says Putin agrees to resume U.S.-mediated peace talks with Ukraine as soon as next month. Ukrainian President Volodymyr Zelenskiy says he supports the talks and hopes they begin as soon as possible.

In the U.S., crude stocks fall by 3.06 million barrels to 412.5 million barrels last week, according to the Energy Information Administration, compared with expectations in a Reuters poll for an 820,000-barrel draw. Distillate inventories, including diesel and heating oil, rise 1.68 million barrels to 104.3 million barrels, versus expectations for a 1.16 million-barrel decline. The Trump administration is also offering to loan up to nearly a third of the 1-million-barrel U.S. emergency heating oil reserve as it seeks to contain prices driven higher by diesel shortages linked to the wars in Iran and Ukraine.

In our earlier report on the surge in crude oil shipping costs, we explained how conflict-related risks in routes such as the Strait of Hormuz and the Red Sea have sent tanker freight and insurance rates sharply higher. We noted that these elevated transport costs are increasingly being baked into crude pricing and can spill over into higher fuel and consumer prices, with import-dependent markets feeling the impact most.

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