Saudi crude exports plunge 59% as conflict closes oil routes

East-West pipeline shutdown on 11 September cut 7 million barrels of daily capacity.

Saudi Arabia's ability to export crude oil is at risk of slowing to a trickle as escalating conflict in the Middle East threatens the country's remaining shipping routes, a development UOB Kay Hian warned could trigger an energy crisis with elevated inflation for Singapore and the broader region.

The situation worsened over the weekend when Houthi rebels seized several strategic positions, strengthening their grip on the Bab el-Mandeb Strait, a critical chokepoint for vessels moving through the Suez Canal and the Red Sea.

Meanwhile, a drone attack on Saudi Arabia's 1,200-kilometre East-West pipeline followed, prompting a shutdown on 11 September. The pipeline carries up to seven million barrels of crude oil per day and had served as the country's main alternative export route after restrictions tightened at the Strait of Hormuz.

The compounding disruptions have already taken a measurable toll on Saudi production. Since the conflict began in February, output has fallen from 10.4 million barrels per day to 6.2 million barrels per day in August, a decline of 40% according to International Energy Agency estimates. Crude exports dropped by 59% over the same period, from 7.3 million barrels per day to three million barrels per day.

UOB Kay Hian warned that heightened geopolitical tension and a potential energy crisis will give rise to elevated inflation, with businesses and consumers in Singapore likely to feel the effects through higher fuel, freight and transport costs.

“We estimated the STI’s current equity risk premium at 3.4% for 2026. We cut our 12-month STI target by 9.3% from 6,682 to 6,061,” UOB Kay Hian said.

The economy and loan growth could slow down due to weak business sentiment aggravated by a prolonged Middle East conflict

The aviation and logistics sectors also face particular exposure given their sensitivity to jet fuel and diesel prices.

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