Key facts
- Global energy prices have spiked due to the conflict between Yemen's Houthis and Saudi Arabia.
- Petrol and diesel costs have risen rapidly in most countries.
- The wholesale price of natural gas has almost doubled in the UK and Europe since July.
- The global oil price is currently above $108 per barrel, up from $70 in June 2026.
- UK petrol prices are above 170p a litre, the highest since 2022.
- US petrol prices have risen from $3.80 in July to $4.32.
- US diesel prices have hit a record level of more than $6 a gallon.
- The Saudi East-West pipeline, with a capacity of 3.6 million barrels per day, was attacked by drones on Friday.
- The Houthis captured strategic territory near the Bab al-Mandab Strait, a transit point for about 5% of global oil supplies.
- A preliminary deal between the US and Iran in June caused oil prices to temporarily fall.
Global energy prices have surged alarmingly, driven by the escalating conflict between Yemen's Houthis and Saudi Arabia, which is causing chaos for the oil industry. Petrol and diesel costs have risen rapidly in most countries, while the wholesale price of natural gas has almost doubled in the UK and Europe since July.
Analysts attribute the price increases primarily to a reduction in global oil and gas supplies. Before the recent conflict escalation, approximately 20% of global oil products and liquefied natural gas supplies passed through the Strait of Hormuz. This flow has been significantly obstructed due to attacks on commercial shipping and energy facilities, as well as a US blockade of Iran's ports.
Saudi Arabia had increased its use of the East-West pipeline to export oil via the Red Sea, but this pipeline was forced to shut down after a drone attack on Friday, which Saudi Arabia has blamed on Iran-backed militias in Iraq. The Houthis have also attacked Saudi oil facilities. While US officials suggest the pipeline will resume operations soon, independent analysts believe the Strait of Hormuz remains significantly obstructed, with volumes falling from around 21 million barrels per day before the conflict to about 8.6 million barrels per day by the end of August.
Furthermore, the Houthis have captured territory near the Bab al-Mandab Strait, another critical trade chokepoint. This has raised concerns that these shipping arteries could face further disruption. The Houthis declared a naval blockade of Saudi ships and ports in July, stating they would not attack vessels from other countries.
While US President Donald Trump attributed the diesel price rise primarily to the Russia-Ukraine War, analysts generally agree that the expanding regional conflict in the Middle East is the larger cause of the recent energy price spike. Ukrainian drone attacks on Russian refineries have also put pressure on diesel prices, as Russia is a major exporter.
Economists warn that sustained higher global energy prices could lead to further inflation, weaker economic growth, and reduced incomes. The IMF estimates a 10% increase in oil prices raises global inflation by 0.4% and reduces global GDP growth by 0.2%. The Bank of England estimates a similar increase raises UK inflation by 0.5% and reduces UK GDP growth by 0.4%. The current rise in global oil prices is significantly larger than the scenarios used in these models. A potential peace agreement between the US and Iran could lead to a drop in oil prices, as seen after a preliminary deal in June.