Saudi Arabia shuttered a primary pipeline capable of transporting 7 million barrels daily following a series of drone strikes originating from Iraq. Simultaneously, Iran-backed Houthi forces seized control of territory near the Bab al-Mandeb Strait, effectively placing two vital maritime chokepoints under the influence of Tehran and its allies. The International Energy Agency reported that Saudi production plummeted to 6 million barrels per day in August, a staggering decline from the previous year’s 9.4 million average.

Market reaction was immediate: WTI crude futures jumped 2.7% to $102.78 per barrel, while Brent crude climbed 2.9% to $107.67. This energy volatility compounds existing anxieties regarding U.S. monetary policy. With August inflation reaching 3.4%, analysts now assign a 90% probability to a Federal Reserve rate hike this week. Following Fed Chair Warsh’s recent rhetoric characterizing inflation as a policy choice, market participants anticipate aggressive tightening despite fears of a potential policy error. Consequently, Asian indices faced heavy selling pressure, led by a 2.9% drop in South Korea’s Kospi and a 1.5% decline in Japan’s Nikkei.