Oil prices rise after a reported Houthi strike on Saudi Arabia’s Ras Tanura refinery, heightening global supply risks and India’s energy concerns.
Oil prices climbed on Wednesday, October 28, after Yemen's Iran-aligned Houthis claimed to have struck Saudi Arabia's biggest oil refinery, at Ras Tanura on the Gulf coast, with a ballistic missile. Saudi authorities had not confirmed the reported strike by Wednesday. Brent crude futures rose $1.81, or 1.6%, to US$115.69 a barrel at 10:42 a.m. EDT (UTC-04), while U.S. West Texas Intermediate (WTI) crude gained $2.52, or 2.5%, to $102.42.
The extent of any damage at the site remained unclear on Tuesday, and Saudi statements have addressed missile interceptions rather than the refinery. The price move reflects not so much confirmed supply losses as the limited flexibility remaining in the global oil market. At the end of September, global inventories stood 509 million barrels below prewar levels. Flows through the Strait of Hormuz were still running at about 74% of their prewar baseline in the week to October 21, a figure Kpler treats as a floor that could be revised upward. The open question is whether Ras Tanura turns out to have suffered damage severe and lasting enough to cut supply, or whether the premium in Brent rests mainly on what Washington decides to do about Iran after the U.S. midterm elections on November 3.
The competing accounts of the attack begin with the Houthis' own. Military spokesman Yahya Saree claimed on X on Tuesday that the group had targeted the Ras Tanura refinery in the Eastern Province with a ballistic missile, causing "massive fires." A fuller statement attributed to Saree described the missile as "striking the target with precision." The group said it had also fired ballistic missiles at the defense ministry in Riyadh and at two military transport aircraft, one at Najran airport and the other at King Khalid Air Base in Khamis Mushait.
Riyadh's public statements have taken a narrower line. In a statement published at 3:51 a.m. local time (UTC+03) on Tuesday, the spokesperson for the Saudi-led coalition in Yemen, Maj. Gen. Turki Al-Malki, said air defenses had intercepted and destroyed three ballistic missiles launched by the Houthis toward the Eastern Region. Saudi authorities did not comment on specific targets but reported that missiles had been intercepted over Riyadh and the Eastern Province. Debris from two missiles intercepted over the capital damaged a building, a construction project and a vehicle, Saudi Civil Defense said.
While those statements focused on interceptions, separate accounts pointed to a fire near the Ras Tanura complex. A blaze broke out early Tuesday near facilities operated by Saudi Aramco at Ras Tanura, home to Saudi Arabia's largest oil export terminal. The fire was subsequently reported to have been contained, according to a person with knowledge of the matter. The company's press office and the Energy Ministry did not immediately respond to requests for comment. Maritime security firm Vanguard said the fire had reportedly been contained, although the extent of the damage and any impact on oil-loading operations remained unclear.
The ministry has spoken more directly about an earlier threat to the same complex. On March 4, an official source at the Energy Ministry said the Ras Tanura refinery had been targeted in an attempted drone attack, with no damage recorded and no disruption to supplies. The earlier incident provides a precedent for an official damage assessment, but Saudi authorities had not issued a comparable assessment of the latest incident by Wednesday.
Into that silence came a far more serious claim from Tehran. Iranian media reported on Wednesday that satellite imagery indicated significant damage to the main refining unit at Ras Tanura, leaving it inoperable. That report has not been independently verified, and Riyadh had not confirmed any strike on the 550,000-barrel-per-day facility.
Ras Tanura matters to traders for more than its refinery. The complex also includes a shipping terminal on the Gulf, west of the Strait of Hormuz, and nearly all Saudi oil exports flow through two main ports, Ras Tanura and Yanbu on the Red Sea. The refinery was shut for a period in the early months of the Iran war as a precaution. Aramco shifted the bulk of its exports to its Red Sea coast when the conflict began in February and Iran blocked much of the traffic through Hormuz, but in recent weeks it has been stepping up crude exports from the Gulf again.
That return to the Gulf followed trouble on the western route. The International Energy Agency (IEA) cited the September 11 bombing of the Saudi East-West Pipeline in its October report. Loadings from the Saudi west coast restarted on September 17, and weekly exports from Yanbu have averaged about 3 million barrels per day since then, data and analytics firm Kpler said in an October 23 briefing. The Houthis claimed on Monday that they had attacked pumping stations along the pipeline, the kingdom's key crude export route bypassing Hormuz, and Saudi Arabia has not confirmed any attacks on it.
Saudi output has recovered without returning to normal. The IEA's October Oil Market Report put Saudi crude supply at 8.3 million barrels per day (mb/d) in September, up from 5.97 mb/d in August. September supply nevertheless remained 2.18 mb/d below the kingdom's implied target and well short of its sustainable capacity of 12.11 mb/d. Crude exports from Gulf producers, led by Saudi Arabia, rose 4.4 mb/d to 13.9 mb/d in September, over 75% of prewar levels, the agency said, before adding: "Renewed attacks in the Gulf leave the recovery fragile."
Production is only the first of three pressures on prices; the cost of moving crude and the size of the stock cushion matter as much. Non-Iranian Middle Eastern crude supply to international markets averaged 16.8 mb/d, above the 2025 average of 16.3 mb/d, Kpler said, while regional crude production remained about 2.7 mb/d below prewar levels. The firm described freight as "the main channel through which the disruption reaches buyers," with landed crude prices of around $120 a barrel deterring large restocking.
Freight is where the strain shows most clearly. By mid-October, moving crude from the Middle East Gulf to Asia on a large tanker cost over $37 a barrel, more than five times its level before the war, the IEA said in an October 21 commentary. Charter rates for very large crude carriers (VLCCs) on that route topped $1.3 million a day, and in September the surge in delivered costs pushed margins for Asian refiners processing Middle East crude into negative territory.
The third constraint is the shrinking inventory buffer, which leaves the market less able to absorb further supply disruptions. Cumulative global observed inventories were 509 million barrels below prewar levels by the end of September, with on-land stocks at their lowest since at least 2016, the IEA said, warning that "oil markets may experience more turmoil in the months ahead before any eventual surplus emerges in 2027." In the United States, crude inventories fell by 1.9 million barrels in the week ended October 23, the Energy Information Administration (EIA) said, against analysts' forecast of a 15,000-barrel build.
Prices respond to shifting expectations as well as to physical scarcity, and Wednesday's rise reversed part of a decline driven by diplomacy. Brent settled down $1.93, or 1.67%, at $113.88 on Tuesday, October 27, and WTI settled down $1.86, or 1.83%, at $99.90, as regional talks eased supply worries. Brent had surged to more than $117 the week before, its highest since April, after a wave of Iranian attacks on tankers around Hormuz. "Continued Houthi attacks on Saudi Arabia and the expanding military presence in the Gulf are keeping supply risks in place, even as diplomatic headlines encourage some of the recent premium to unwind," analysts at Gelber & Associates said in a note.
Some analysts tie much of that premium to Washington rather than to Yemen. "The impression now is that there is a significant risk premium in crude oil prices for the risk that the US/Israel will attack Iran in the coming weeks," SEB analyst Bjarne Schieldrop said on Tuesday. The United States has told several Gulf Arab countries to be ready for a short but intense military campaign after the midterms, according to people briefed on the conversations, and President Donald Trump said on Sunday that he had a "decision to make" on Iran.
Dennis Kissler of BOK Financial linked the two threads. In a note, he said crude futures were again pricing in tighter near-term supplies on news that the United States was likely to restart military operations soon. Those operations could be more intense than in the past, he added, given the latest attacks on Saudi Arabia and other Middle East allies. Kpler said its analysts see Iran leaning toward escalation before the midterms.
Diplomacy offers a partial counterweight. Qatari mediators presented Iran with a new draft deal on Sunday, and a response was expected by the end of the week, an official briefed on the negotiations said. A senior Iranian official said Doha had only put forward unacceptable ideas that did not amount to an offer. Senior officials from Saudi Arabia, Turkey and Pakistan met Iranian counterparts in Tehran on Monday, and the four countries agreed to continue the dialogue.
Even if diplomacy eases the military risk, producers have little room to add barrels quickly. The seven core members of OPEC+, the Organization of the Petroleum Exporting Countries and its allies, are expected to keep December output targets steady when they meet on Sunday, November 1, people with knowledge of the matter said, and production in most of those countries is below target. The seven countries set that date at their previous meeting on October 4.
With little new OPEC+ supply in prospect, some forecasters see prices staying high into the final months of the year. Swiss bank UBS expects Brent to stay near $110 a barrel through year-end, having raised its forecast from $100. "An undersupplied market could push commercial stocks lower and should sustain oil prices," UBS strategist Giovanni Staunovo said.
Saudi equities showed a more muted reaction than the crude market. Saudi Arabia's benchmark index reversed early losses to finish 0.4% higher at 10,023 on Wednesday, while Aramco shares fell 0.3%.
The reaction was less reassuring in India, where dependence on imported crude leaves the economy exposed to sustained increases in oil prices. The Nifty Oil and Gas index fell 2.27% to 10,296.60 on Wednesday, its steepest fall since October 8, and the Sensex, weighed down by information technology and oil stocks, closed down 352.64 points at 73,246.03. The rupee weakened 21 paise to a provisional close of 95.28 per dollar.
Exposure on that scale reaches policy. India's crude import dependence was 88.1% on a consumption basis in April to September, and its crude import bill rose 46.3% to $90.6 billion, according to the latest Monthly Ready Reckoner from the government's Petroleum Planning and Analysis Cell, as cited in an October 17 report. When the Reserve Bank of India raised its policy repo rate by 25 basis points to 5.50% on October 7, it said "the re-escalation of the conflict in West Asia and the consequent sharp volatility in crude oil prices has kept the global economy in a state of flux."
The physical evidence from Ras Tanura remains inconclusive: a fire reported contained, an unverified Iranian claim of a disabled refining unit and Saudi statements that speak only of interceptions. If the refinery and terminal prove largely intact, the market's attention will shift further toward the decision Trump said on Sunday he had to make. After November 3, the key question will be how much of Brent's roughly US$115 price reflects actual supply losses and how much reflects fears of a wider war.
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