• Brent crude jumped 2.2% to $111.24 a barrel, the highest since May, as attacks on Saudi energy infrastructure and shipping raise concerns about supply disruptions.
  • The risk premium is being driven by fears of future outages rather than actual production losses, with Middle Eastern exports still largely flowing.
  • Freight costs have skyrocketed above $20 a barrel, compounding the impact on consumers and refiners.

Oil prices extended gains on Thursday, with Brent crude rising $2.42, or 2.2%, to $111.24 a barrel by 10:45 a.m. EDT, the highest close since May 18. U.S. West Texas Intermediate climbed $1.14, or 1.2%, to $98.29. The rally was fueled by escalating tensions in the Middle East after a series of attacks on Saudi Arabian oil facilities and commercial shipping, which have stoked fears of supply disruptions.

Attacks Escalate

The latest spike follows deadly attacks on October 21, including strikes on Saudi Aramco (2222.SR)’s Shaybah oilfield that killed two people and an attack on Dammam’s King Fahd International Airport that left one dead. While the Shaybah strike did not affect operations, the incidents have heightened concerns about the security of Saudi energy infrastructure. According to people familiar with the matter, Aramco instructed staff to evacuate its Dhahran headquarters as fighting intensified. The U.S. has ordered some diplomatic personnel and family members to leave Saudi Arabia, signaling a deteriorating security assessment.

Shipping in the region remains highly vulnerable. Data from Kpler cited by ICIS indicates at least 18 attacks on vessels over the past two weeks, with threats extending from the Strait of Hormuz into the Gulf of Oman. The attacks are linked to Houthi rebels in Yemen, who have been targeting Saudi and shipping interests in retaliation for the Saudi-led coalition’s campaign in Yemen.

Risk Premium, Not Supply Shock

While prices are surging, the physical supply of oil has not yet been significantly disrupted. Middle Eastern crude exports stood at about 17 million barrels a day last week, compared with a pre-conflict average of approximately 18 million, according to Morgan Stanley (MS) estimates based on Kpler data. Kuwait reported that its exports had recovered to pre-conflict levels. The distinction is crucial: markets are pricing in the risk of future disruptions, not an actual shortage.

That said, the cost of moving oil has skyrocketed. Average crude freight rates have surpassed $20 a barrel, up from around $3 a year ago, according to Goldman Sachs (GS). The bank warned that elevated freight costs could squeeze Asian refinery margins, reduce refined-product output, and ultimately lift fuel prices for consumers. “The attacks are outweighing evidence of recovering exports,” said PVM analyst Tamas Varga. “Without de-escalation, we could see prices remain elevated.”

Mixed Impact on Industry

The price surge has created winners and losers across the energy complex. U.S. refiner Valero (VLO) reported its highest-ever quarterly profit, driven by conflict-related disruptions that boosted refining margins. However, not all refiners benefit equally—location, feedstock access, and freight costs play a significant role. Asian refiners, in particular, are exposed to higher transport costs, which could erode profitability.

Producers able to maintain output and deliver safely are benefiting from higher prices, while those in exposed areas face security and operational costs. The situation remains fluid, with diplomatic efforts potentially able to quickly reduce the geopolitical premium. Reports of Iranian discussions with Pakistani mediators helped reverse an earlier rally on October 20, highlighting how quickly sentiment can shift.

What to Watch

Traders will continue to monitor for further attacks, any verified production or export outages, and diplomatic developments. A credible ceasefire or safer tanker passage could rapidly unwind part of the premium. Additionally, Russian fuel exports following U.S. sanctions and tariff relief, as well as Libya’s recent pipeline closure, could offset or compound the Middle Eastern disruption. For now, volatility is expected to remain high, with analysts warning that without de-escalation, elevated prices are likely to persist.

Correction: An earlier version of this article misstated the timing of the latest Brent price. It was as of 10:45 a.m. EDT.