Oil surges past $108 as Saudi pipeline shutdown and Houthi strikes roil markets

Oil prices surged above US$106 a barrel on Tuesday as Saudi Arabia faced new Houthi attacks and the East-West pipeline remained shut down, fueling worries of prolonged disruptions to global crude supplies. Brent crude futures rose 1.18% to US$106.93 a barrel, while US West Texas Intermediate futures climbed 1.24% to US$102.65 a barrel.

Iran-backed Houthi forces in Yemen launched fresh attacks on Saudi Arabia's military installations, following earlier strikes that disrupted the East-West pipeline. Traders are treating each attack as a rising supply risk and are highly sensitive to any signs that the pipeline or Gulf oil flows may normalize. With Saudi Arabia potentially running out of exportable oil within days, the outage could remove up to 4% of global oil supply.

The supply concerns come ahead of the Federal Reserve's policy decision this week, with markets pricing in an 89% chance of a 25-basis-point rate increase, which could further tighten monetary policy and boost the US dollar.