Following a series of drone strikes on Thursday, Saudi Arabia has halted operations on its East-West pipeline, which serves as a crucial alternative route for its oil exports that bypasses the Strait of Hormuz.

The Ministry of Energy announced the shutdown on Friday as a precautionary measure, stating in a post on X that the attacks resulted in several injuries. Emergency response teams are currently working to secure the pipeline and evaluate its condition. According to a statement from Saudi's Ministry of Foreign Affairs on X, multiple drones originating from Iraq targeted the pipeline in the Riyadh and Madinah regions.

Regional conflict has escalated sharply in recent days. The Yemen-based Houthis have claimed responsibility for targeting Saudi energy facilities in Abha, Najran, and Jazan, while the US has conducted strikes against Iranian oil tankers, further inflaming tensions across the Middle East.

The East-West pipeline has become a vital component for Saudi Arabia's oil export strategy amid the ongoing disruptions caused by the Iran war. With tanker traffic through the Strait of Hormuz grinding to a near halt earlier this year, this 7 million barrel-a-day conduit quickly reached its full operational capacity.

This pipeline system transports crude away from the Persian Gulf to the Red Sea, where it can be loaded onto tankers for shipment. However, this route has increasingly faced threats in recent weeks from attacks launched by the Iran-backed Houthi militants.

Gregory Brew, a geopolitical analyst at the Eurasia Group, noted that Thursday's attacks represent "a pretty clear demonstration that both Iran and its allies have both the capability and the will to strike regional energy infrastructure, and that infrastructure is vulnerable to ballistic missile or drone attacks."

Oil markets showed minimal reaction to the ministry's announcement, with Brent futures trading around $105 a barrel. This follows a sharp surge on Thursday when prices nearly reached $110 amid speculation about how the latest violence might impact regional energy supplies. Brew commented that "the size of the disruption has already been priced in."

The kingdom's oil exports had already fallen significantly to approximately 3 million barrels per day in August, marking the lowest level in data going back to early 2017, as Houthi militants intensified their attacks on ships traversing the Red Sea.

The Houthi threat compounds ongoing constraints on oil flows through the Strait of Hormuz. The US has enforced a blockade on loadings from Iranian ports, while Tehran continues to target shipping navigating the strait. Industry executives and data from tanker-tracking agency Vortexa indicate that only about 1 million barrels a day of oil products are currently being shipped through the contested waterway, a dramatic decline from the prewar level of roughly 4 million barrels.

The consequences extend beyond just crude oil prices. Global fuel costs are also elevated, with the average US retail price for gasoline hovering above $4 a gallon, a seasonal high, while average US retail diesel prices have skyrocketed to a record $6 a gallon.

Safety buffers that initially helped cushion energy supplies in the early stages of the conflict are becoming depleted. US oil stockpiles have dropped significantly, and most of the emergency reserves released by governments have already reached the market.

Houthi forces have been advancing southward along Yemen's Red Sea coast toward the Bab el-Mandeb Strait this week, while maintaining their missile and drone attacks on Saudi Arabia. This has forced the kingdom to suspend operations at several energy sites.

The Houthi advance presents the kingdom with a stark dilemma: either escalate a military campaign that has failed to defeat the militants over years of conflict, or accept greater Houthi influence over the Red Sea region. Fernando Ferreira, an analyst at Rapidan Energy Group, explained that "Riyadh is in a difficult position. As the US maintains the blockade and succeeds in escorting more tankers out of the region, Iran will pivot toward increased attacks on Gulf energy facilities."