Oil prices climbed on Thursday as escalating attacks in Saudi Arabia prompted Washington to order some diplomats and their families to leave the Kingdom, intensifying concerns over the security of Middle Eastern energy supplies. The rise comes as markets assess the risk that the widening regional conflict could disrupt crude production, exports and shipping routes, with potential consequences for inflation and economic growth worldwide.

Geopolitical Risks Drive Crude Higher

Brent crude futures rose $1.29, or 1.2%, to $110.11 a barrel, while US West Texas Intermediate (WTI) gained 97 cents, or 1%, to $98.12 in early trading on Thursday. Brent had ended Wednesday broadly unchanged, while WTI had declined by 67 cents.

The US ordered non-emergency government employees and their family members to leave Saudi Arabia amid escalating attacks by Yemen’s Iran-aligned Houthi movement. The latest violence included an attack on a civilian airport in Dammam that killed at least one person and wounded eight others, as well as a drone strike on a Saudi oil field that killed two people. The incidents have raised concerns that attacks could threaten infrastructure critical to regional energy production and transport.

Shipping Disruptions Raise Supply Concerns

The risks extend beyond individual oil facilities. At least 18 attacks on shipping were recorded over the preceding two weeks, while threats to tankers operating beyond the Strait of Hormuz have raised concerns about crude loadings and ship-to-ship transfers in the Gulf of Oman. Disruptions across these routes could delay deliveries, increase transportation costs and force buyers to seek alternative supplies.

The potential impact is significant because the Middle East remains central to global oil exports. Even without a sustained reduction in production, uncertainty over whether cargoes can move safely may add a geopolitical risk premium to prices. A prolonged escalation could therefore keep crude elevated, while any de-escalation or restoration of secure shipping would ease some of that pressure.

US Inventory Data Adds Another Market Signal

US crude inventories fell by 3.06 million barrels last week to 412.5 million barrels, exceeding analysts’ expectations for a decline of 820,000 barrels. The larger-than-expected draw provided additional support for oil prices by suggesting tighter near-term crude availability.

However, the broader inventory picture was mixed. Distillate stocks, which include diesel and heating oil, increased by 1.68 million barrels to 104.3 million, despite expectations for a decline. The US government has also offered to lend nearly one-third of its one-million-barrel emergency heating oil reserve in an effort to contain prices amid fuel shortages linked to the conflicts in Iran and Ukraine.

Markets will now watch for further attacks, changes in diplomatic and military measures, and signs of disruption to oil exports or shipping. Sustained supply interruptions could push prices higher and intensify inflation pressures, complicating decisions for central banks. Conversely, a reduction in hostilities and stable export flows could ease the risk premium. For investors, the central question is whether the latest increase reflects a temporary reaction to security concerns or the beginning of a more persistent tightening in global energy supply.