Oil prices are rising sharply again in global markets as disruptions to Saudi Arabia’s energy infrastructure and key shipping routes threaten to further constrain supplies. The latest disruptions have raised concerns that higher energy costs could add to inflationary pressure around the world.
Petrol and diesel prices have risen in many countries, while wholesale natural gas prices used for heating and electricity generation have also increased. In the UK and Europe, gas prices have nearly doubled compared with July, according to the report.
If energy prices remain elevated for an extended period, borrowing and mortgage costs could rise as central banks respond to renewed inflationary pressure. Higher transport and production costs could also push up prices of food and other goods.
Analysts say reduced energy supplies are a major factor behind the recent price increases.
Crude oil prices have risen above $108 a barrel, compared with around $70 in June, according to the report. The increase has also pushed up petrol and diesel prices.
In the UK, the average petrol price has exceeded 170 pence per litre, its highest level since 2022, compared with around 150 pence in July.
In the United States, the price of a gallon of petrol—about 3.8 litres—has risen from $3.80 in July to $4.32. Diesel prices have also reached record levels, exceeding $6 a gallon.
Recent reports put Brent crude above $100 a barrel amid continuing supply disruptions in the Middle East. On Thursday, prices settled about 1% lower but remained above $100 as markets assessed the impact of the disruptions and possible additional Saudi supplies.
The Strait of Hormuz is one of the world's most important energy shipping routes. Before the current conflict, about 20% of global petroleum products and liquefied natural gas passed through the narrow waterway, according to the report.
Since the conflict began, attacks on commercial vessels and energy facilities in the Gulf region have significantly reduced energy flows through the route.
Saudi Arabia had increased its use of the East-West pipeline, which runs from the country's eastern oil fields to the Red Sea, as an alternative route. The 1,200-kilometre pipeline has been carrying several million barrels of oil a day and became particularly important as traffic through Hormuz was disrupted.
However, the pipeline was temporarily shut after a drone attack. Saudi authorities said drones originating from Iraq struck the pipeline in the Riyadh and Medina regions, causing damage and injuries. No group had claimed responsibility for the attack at the time of the initial reports.
The pipeline shutdown has added to concerns about global oil supplies. Satellite imagery has shown significant damage at a pumping facility, although estimates of the repair period have varied.
The US government has said energy shipments through the Strait of Hormuz are continuing at levels similar to those before the conflict. However, independent analysts have reported a substantial decline in traffic.
According to the US Energy Information Administration, about 21 million barrels of oil and petroleum products were transported through the Strait of Hormuz each day before the conflict.
The maritime intelligence firm Kpler estimated that the volume had fallen to around 8.6 million barrels a day by the end of August, according to the report.
The Bab el-Mandeb Strait, at the southern entrance to the Red Sea, is another important route for international trade.
Recent advances by Yemen's Houthi forces in areas near the waterway have raised concerns over another potential disruption to energy shipments. Reports say Houthi forces have also attacked Saudi energy infrastructure, adding to the risks facing regional oil exports.
Before the conflict, around 5% of global oil supplies passed through Bab el-Mandeb. Another roughly 5% typically moved through the northern Red Sea toward the Mediterranean via the Suez Canal and an Egyptian pipeline.
Further disruption to these routes could therefore reduce global oil supplies and put additional upward pressure on prices.
US President Donald Trump has said the Russia-Ukraine war, rather than Iran, is the main reason for rising diesel prices in global markets.
Analysts have also pointed to the war's impact on diesel supplies. Drone attacks on Russian oil refineries have raised concerns about reduced production and exports. Russia is the world's second-largest diesel exporter, according to the report.
However, many analysts cited in the report say the recent rise in energy prices is being driven largely by the widening conflict in the Middle East.
Economists generally say prolonged high energy prices can raise living costs and slow economic growth. Higher energy and transport costs can also put pressure on household incomes and wages.
An IMF study found that a 10% increase in global oil prices typically raises inflation by about 0.4 percentage point in the short term.
The Bank of England has estimated that a 10% increase in global oil prices could raise UK consumer-price inflation by around 0.5% at its peak. The central bank also notes that additional increases in gas prices could amplify the inflationary impact.
The report says the rise in oil prices since June has been several times larger than the increase used in those estimates, highlighting the potential scale of the inflationary pressure if high prices persist.
However, the situation could change if diplomatic efforts reduce tensions in the Middle East. A de-escalation involving the United States and Iran could ease pressure on oil markets and bring prices down, as happened after an earlier preliminary agreement in June, according to the report.
