Oil rises as US orders diplomats to leave Saudi Arabia amid escalating tensions

Crude oil prices surged on Thursday as the Houthis launched multiple attacks in Saudi Arabia, prompting the United States to instruct some diplomats and their families to temporarily relocate from its missions in the country. Brent crude futures surged $1.29, or 1.2%, to $110.11 per barrel, while US West Texas Intermediate crude climbed 97 cents, or 1%, to $98.12. Brent had steadied on Wednesday, while WTI had dipped 67 cents.

The U.S. State Department announced plans to evacuate family members from several other U.S. missions in the region, according to Reuters reports. The Yemen-based Houthis targeted a civilian airport in Dammam, killing at least one person and wounding eight others, while a drone attack on a Saudi oil facility resulted in two deaths. Iranian media also reported explosions in Sirik, southern Iran, though the cause and origin of the blasts remained unclear.

Iranian Foreign Minister Abbas Araqchi told the Financial Times that Iran was prepared to defend itself, and President Masoud Pezeshkian stated that the U.S. could not expect dialogue while imposing sanctions and threatening Iran. Over the past two weeks, there were at least 18 attacks on ships, according to Kpler data, with Iran reportedly targeting tankers beyond the Strait of Hormuz, impacting Gulf crude shipments and ship-to-ship transfers.

Meanwhile, Russian President Vladimir Putin met with U.S. Special Envoy Steve Witkoff in St. Petersburg on Wednesday to discuss ending the war in Ukraine amidst Washington's efforts to prevent Europe's deadliest conflict since World War Two. Putin agreed to resume U.S.-mediated peace talks with Ukraine as early as the following month.

Ukrainian President Volodymyr Zelenskiy expressed support for the talks and hoped they would commence promptly. The U.S. Energy Information Administration reported that U.S. crude stocks fell by 3.06 million barrels to 412.5 million barrels last week, surpassing expectations of an 820,000-barrel decline. Distillate stockpiles, encompassing diesel and heating oil, increased by 1.68 million barrels to 104.3 million barrels, against estimates for a 1.16 million-barrel reduction.

The Trump administration offered to lend nearly a third of the 1-million-barrel U.S. emergency heating oil reserve in an attempt to stabilize prices that have risen due to diesel shortages stemming from conflicts in Iran and Ukraine.