Houthi attacks sparked fires at oil facilities and utilities in southern Saudi Arabia, temporarily suspending operations and marking a major escalation in the renewed conflict with Iran-backed rebels. According to Business Standard, the wave of Houthi attacks were a major escalation in the renewed conflict between an important US ally and the Iranian-backed rebels in Yemen. Maj. Gen. Turki al-Malki, a spokesperson for the Saudi-led coalition fighting in Yemen, said the attacks hit "civilian and economic facilities" in the Saudi cities. The kingdom's Energy Ministry confirmed that operations at the oil facilities and utilities were temporarily suspended following the attacks. This development represents a significant escalation in the broader Middle East conflict that has been disrupting global oil flows.
Diesel prices have reached an all-time high, soaring to an average of $5.85 a gallon for the first time ever as the 6-month-long war with Iran continues to disrupt the world's flow of fuel. According to Associated Press, this represents a more than $2 increase since the war began in February, when diesel averaged about $3.76 per gallon. The price surge is particularly significant as diesel is used for freight and delivery networks, meaning higher transportation costs for everyday goods. California leads with the highest average diesel prices at $7.71 per gallon, while Hawaii also saw diesel prices top $7. The national average for regular gasoline has also climbed to $4.15 per gallon, compared with $3.20 at this time in 2025, according to AAA. The price of diesel is now $5.85 a gallon, up from $3.71 a year ago, as the AAA motorists' association reported, with the price representing a more than 50% increase year-over-year. In response to rising fuel costs, US President Donald Trump recently pledged to "substantially lower Gas Prices for all Americans" through an oil deal with Venezuela.
The Strait of Hormuz has crossed another critical threshold as US forces struck three Iranian oil tankers on Saturday, including one off the coast of Kharg Island, near Iran's key oil export hub. According to Investing.com India, Iran's Revolutionary Guard released footage purporting to show attacks on commercial vessels after US forces struck three Iranian crude carriers, with Tehran targeting three tankers travelling through what it calls an unauthorized route through Hormuz, together with three vessels affiliated with the United States. CENTCOM said US forces disabled the M/T Downy off Kharg Island and M/T Stark 1 near Jask, while the unladen M/T Kylo was destroyed in the Gulf of Oman after its crew was told to abandon ship. The strikes followed Iranian ballistic missile launches toward US Navy vessels, marking a significant escalation from previous intercepts to direct attacks on Iran's oil logistics chain. As per Axios, the Trump administration had authorized what one US official described as a "tanker for tanker" policy, giving Washington the option of attacking Iranian government tankers in retaliation for Iranian actions against shipping. The arithmetic is deliberately asymmetric - Iran shoots toward American warships; Washington removes Iranian oil carriers, with the message from CENTCOM that every attack on US forces can carry a larger economic price.
Brent crude futures climbed 34 cents, or 0.35%, to $97.34 a barrel by 0000 GMT while US West Texas Intermediate crude was at $92.63 a barrel, up $1.15, or 1.26% on Tuesday, as reported by Business Standard. Brent had already climbed to its highest level since July 24 in the previous session, with the latest gains coming after Iran warned that it would retaliate against any further US attacks on its assets. Brent rose 7.8% last week while WTI gained nearly 10% after the US and Iran resumed attacks and caused a reduction in oil flows through the Hormuz strait where a fifth of the world's oil supply used to transit. Oil is a key ingredient in car fuel and supplies have been limited by Iran responding to the war by effectively closing the Strait of Hormuz, a narrow waterway south of the country through which a fifth of the world's oil is transported. OPEC+ kept its oil output policy unchanged for October at a meeting on Sunday, as it needs to agree new quotas before deciding its next output steps. Despite the escalation, oil continues to flow through the Strait of Hormuz, averaging a little more than 9 million barrels a day, made possible by US Navy escorts, according to the US energy secretary.
The escalation has prompted major financial institutions to significantly revise their oil price outlooks higher. Goldman Sachs has warned that Brent could rise to $120 a barrel if shipping disruptions through the Strait of Hormuz persist, with its base case assuming Brent will average $80 a barrel in the fourth quarter and $75 a barrel next year. For 2027, the bank raised its forecasts to $80 and $75, respectively, based on a new assumption that disruptions to Middle East shipping will continue into 2027. Citi has raised its average Brent crude price forecast for the third quarter to $86 a barrel from $80, citing a longer-than-expected timeline for the reopening of the Strait of Hormuz. ANZ analysts have also lifted their short-term Brent forecast to $95 a barrel and warned that prices could move higher if the Middle East conflict intensifies, noting that a prolonged standoff involving calibrated military action by the US and Iran appeared to be the most likely scenario. The front-month Brent contract is trading at a premium of around $20 over the October 2027 contract, reflecting the market paying a steep premium for barrels available today compared with barrels for next year. According to Kotak Securities, $90 is now a strong floor for Brent, while $102 is the major resistance level, with a break above $102 potentially triggering significant upside momentum toward $115-$116.
US President Donald Trump, meanwhile, said oil prices would fall sharply once the US achieves victory in its conflict with Iran and predicted that gas prices could eventually fall below two dollars per gallon. In a post on his Truth Social platform, Trump directly linked high energy costs to the ongoing military operations in the Middle East and said markets would stabilise rapidly after the conflict. "Oil prices will drop precipitously, like everything else is dropping (but more!), when we WIN the war with Iran," Trump wrote. "Three Dollars a gallon, but ultimately, below Two Dollars a gallon." Trump also repeated his warning that the US would not allow Iran to have a nuclear weapon, stating "It will all happen quickly, and Iran will never have a Nuclear Weapon. MAGA!" His comments came as he shared a post by US secretary of war Pete Hegseth, who claimed that Iran's "oil tanker fleet is defenceless" and reiterated Washington's claims that Iran's navy and air force had been destroyed.
