How Iran Just Broke the U.S. Oil Shield In Saudi Arabia Yet Again

The attacks last week in Saudi Arabia’s largest oil refinery, Ras Tanura (again), by the Iran-backed Houthis (again), which pushed oil prices up (again), once more underlined the powerlessness of the region to properly defend itself from Iran and its network of proxies and the redundancy of the billions of dollars’ worth of defence equipment the region’s countries bought from the U.S. to do precisely this. Aside from reminding Washington and its allies that Tehran can strike wherever and whenever it chooses to in the region, the resultant jump in oil prices further highlighted that it is Iran that holds much of the price trajectory of this asset in its hands and not the U.S. The fact that these attacks came just before the 3 November U.S. Mid-Term elections also demonstrated that things have become very personal now between the remaining leadership of the Islamic Republic and their counterpart in Washington, President Donald Trump.History has clearly shown a very direct relationship between oil prices, the U.S. economy, and the electoral prospects of sitting U.S. presidents and their parties in all elections, not just presidential ones, as fully examined in my latest book on the new global oil market order. Suffice it to say here, historical data demonstrate that every USD10 per barrel or so change in the price of crude oil results in around a 25-30 cent change in the price of a gallon of gasoline. And for every 1 cent that the average price per gallon of gasoline rises, more than USD 1 billion or so per year in American consumer spending is lost, so damaging the U.S. economy. The political importance of this is that since 1896, the sitting U.S. president and his party have won re-election 11 times out of 11 if the economy was not in recession within two years of an upcoming election. However, sitting US presidents who went into a re-election campaign with the economy in recession won only once out of seven occasions. Entirely unsurprising to anyone -- most importantly, to Tehran -- was that this latest attack on Ras Tanura did indeed push oil prices up (by around 1 per cent), as has happened on all other similar attacks. The 550,000 barrels per day (bpd) refinery -- which is a vital cornerstone for Saudi crude oil exports -- was hit by the Houthis back in March, with drone interception debris causing a fire at the site, and it was also hit in March 2021 by a major drone and missile attack from the Houthis. In all cases, as in the latest one, despite official denials at first from Iran, it was senior Islamic Revolutionary Guard Corps (IRGC) commanders in Tehran who ordered the attacks, according to senior security sources in Washington, London, and Berlin exclusively spoken to by OilPrice.com at the time. IRGC officers and men were also on the ground in Yemen co-ordinating the strikes as part of the longstanding funding, arming, and training of the Houthis by the IRGC. Its activities frequently include advising the group in live, high-profile missile strikes on site, as also occurred in the 8 September drone and ballistic missile attacks that targeted four cities in the southwest of Saudi Arabia -- Abha, Khamis Mushait, Jazan, and Najran. The main objectives were energy installations and economic infrastructure belonging to state-owned oil giant, Aramco, which resulted in many wounded and multiple oil installations being set ablaze. The fires forced the Saudi Energy Ministry to temporarily halt operations at several key energy facilities, sending Brent crude oil prices back up toward USD100 pb at that point. It should be remembered that exactly the same sort of Iran-backed, Iran-ordered attacks by the Houthis have been going on in earnest since the landmark 14 September 2019 drone and cruise missile attacks on Aramco’s Abqaiq and Khurais oil processing facilities attacks by the Houthis, as detailed in my latest book on the new global oil market order. Together, at the time, these two facilities represented around 50 percent of Saudi Arabia’s oil production, or about 5 percent of the global oil supply. As such, the attacks caused an immediate spike of up to 20 percent in global oil prices and were considered one of the most strategically significant energy-infrastructure strikes ever recorded.This repeated attack pattern by Iran and its proxies on key U.S. allies in the Middle East has great benefits for Tehran and its backers -- notably China and Russia. For years, Washington had reassured its Gulf allies that the enormously expensive systems it sold them -- Terminal High Altitude Area Defense (THAAD) interceptors, Patriot defences, early-warning radars, and fleets of U.S.-made drones -- would provide a reliable shield against precisely the kind of missile and drone attacks that Iran threatened to launch. Yet from relatively early on at the outset of the U.S.’s ‘Operation Epic Fury’ that began on 28 February, Iranian strikes had destroyed or disabled the AN/FPS-132 early-warning radar in Qatar, multiple AN/TPY-2 THAAD radars across the region, the AN/TPS-59 radar in Bahrain, and a string of MQ-9 Reapers. This exposed a very uncomfortable truth: the U.S. cannot adequately defend these Gulf allies, either directly with its own forces or indirectly through the systems it has sold them.That, in turn, strikes at the very heart of the security guarantees that underpin the Trump-championed ‘Abraham Accords’ that are central to Washington’s wider strategy to counter growing Russian and Chinese influence across the Middle East. If U.S. protection turns out to be an illusion, then the incentive for Gulf states to hedge their security bets with Beijing and Moscow only grows stronger -- a strategic windfall for Russia at the very moment it is looking to make gains in Ukraine, and for China as it eyes the land across the Taiwan Strait. Moreover, given the highly effective control that Tehran had demonstrated over the Houthis and other terrorist proxies past and present -- and the deep influence Beijing has over Tehran via the ‘Iran-China 25-Year Comprehensive Cooperation Agreement’ -- Gulf states also know that Beijing can pressure Iran to halt all such attacks quickly. They also know that the same applies to halting Iranian-led blockades and similar disruptions through the Strait of Hormuz, Bab-al-Mandab Strait, and through the Red Sea route that leads into the Suez Canal. The 25-Year Agreement’, as first revealed anywhere in the world in my 3 September 2019 article and analysed in full in my latest book on the new global oil market order, gave Beijing enormous power over all these routes, via Iran. This is compounded by China’s huge sway over Djibouti and Eritrea (on the other side of the Bab al-Mandab Strait and the Red Sea approach to the Suez Canal) established by predatory loans-for-infrastructure deals given to them under its ‘Belt and Road Initiative’ programme. A testament to all of this is that even early on in the current conflict, Chinese-flagged and Chinese-operated supertankers (such as the Cosnew Lake and Xin Long Yang) were allowed by the Houthis to freely carry millions of barrels of Saudi and Emirati crude directly through the Bab el-Mandeb Strait without a single scratch.Finally, Iran’s latest attack on Saudi Arabia has underscored the equal uselessness of the initially much-vaunted ‘Makkah Defence Alliance’ formed on 7 August 2026, which was no accident. Comprising Saudi Arabia, Turkey, and Pakistan, it is explicitly modelled around the core collective defence principle enshrined in NATO’s Article 5 -- that is, that an armed attack on one member shall be considered an attack against them all. Broadly speaking, Saudi Arabia brings deep financing ability and a vast network of regional intelligence contacts to the grouping. Turkey -- itself a member of NATO and tied into the U.S. and its key Western allies -- provides advanced military hardware, high-tech defence equipment, and a well-established production line for artillery and drones to the alliance. And Pakistan brings a huge frontline military and nuclear weapons. Pakistan’s Defence Minister Khawaja Asif stated that its ‘full military capabilities’ will be available under their defence agreements. Subsequently, it clarified that the Alliance pact is strictly defensive and conventional -- but it does still have the weapons. As of now, following the Iran-backed Houthi attacks against Saudi Arabia on 8 September and the 27 October attacks, the Alliance has done precisely nothing.By Simon Watkins for Oilprice.comMore Top Reads From Oilprice.comBrent Hits $117 as Tanker Catches Fire in Strait of HormuzJapan to Tap $7 Billion from Government Fund to Subsidize Gasoline PricesEuropean Gas Tops 101 Euros for First Time Since 2022