Oil prices rose sharply Tuesday morning after reports of a drone attack on Saudi oil pumping stations.
According to the official Saudi Press Agency, Saudi Energy Minister Khalid al-Falih said the incident was an “act of terrorism” while describing the drone attacks on two oil pumping stations near Riyadh for the East – West pipeline.
Brent crude futures rose 1.6% to $71.38 a barrel, up $1.15. The price of US crude futures (WTI) remained stable at $61.95 dollars a barrel, up 1.4% during the session.
The fire has been contained later throughout the day, and al-Falih confirmed that oil production had not stopped. Saudi Aramco said its oil and gas supply to Europe had not been affected and no one had been hurt.
“This act of terrorism and sabotage in addition to recent acts in the Arabian Gulf do not only target the Kingdom but also the security of world oil supplies and the global economy,” al-Falih said.
No one was directly accused of carrying out the attack so far, but a Yemeni television channel run by Houthi said on Tuesday morning that it launched drone attacks on several Saudi facilities.
“Seven drones carried out attacks on vital Saudi installations,” the Masirah television channel quoted a military official as saying.
” These attacks prove again that it is important for us to face terrorist entities, including the Houthi militias in Yemen that are backed by Iran.” Faleh said, according to a statement by the Saudi Press Agency.
Houthi rebels in Yemen, backed by Iran, have been fighting Saudi Arabia since the kingdom launched an offensive in early 2015 to defend its internationally recognized government, which was overthrown by the Huthis. The United Nations considered the conflict, which lasted more than four years, the worst humanitarian crisis in the world.
Tadawul, Saudi Arabia’s main stock index fell 3.8%.
The exchange, which joined the MSCI Emerging Markets Index this year as part of the country’s economic diversification agenda, fell 2.7 percent on Monday on the back of government reports that two Saudi oil tankers were among four ships targeted in an unspecified “sabotage attack” of the United Arab Emirates coast of Fujairah.
Concerns about a potential conflict
The series of incidents has escalated tension in the Kingdom, where a sabotage attack on vessels on Sunday raised fears of a possible conflict with Iran. The escalation could threaten the Strait of Hormuz, which is the transit point for about 30 percent of the world’s sea-transported oil.
The news comes a week after the increasingly provocative language between Washington and Tehran.
On the basis of “very real” threats coming from Iran, with specific details being omitted, Foreign Secretary Mike Pompeo said during a news briefing on Sunday that all options, includig military and otherwise, would be on the table if Iran was to ” make a bad decision.”
Tehran said last week it would return to higher levels of uranium enrichment, in violation of the 2015 Iran nuclear deal, if Europe does not protect it from the impact of US sanctions that crippled Iran’s economy.
This came after the White House published news of an American strike group carrier in the Gulf to send an “unmistakable” message to Iran. Although the ship was on a routine tour, the administration’s announcement indicated its willingness to confront.
As military equipment in the Persian Gulf rises in volume, analysts and foreign officials fear that misjudgment or misunderstanding could spark a serious conflict.
British Foreign Secretary Jeremy Hunt told reporters on Monday: ” We are very worried about the risk of a conflict happening by accident with an escalation that is unintended.”