Iran-Israel War: Drone strikes hit Saudi Aramco’s Ras Tanura refinery

Saudi Arabia’s state-owned Saudi Aramco temporarily halted operations at its Ras Tanura Refinery, one of the largest in the Kingdom, following a suspected Iranian drone attack, the country’s defence ministry confirmed on Monday. The facility sustained partial damage after debris from intercepted drones ignited a fire at the site, although authorities said the incoming aircraft were neutralised before reaching critical infrastructure.

The government-owned Saudi Press Agency quoted a Saudi military spokesperson as confirming that the drones were intercepted. However, footage circulating online showed thick black smoke rising from the complex. Security experts note that even successfully intercepted drones can generate debris capable of sparking fires or causing injuries. Located near Dammam, Ras Tanura has a refining capacity of more than 550,000 barrels per day and also serves as a key crude export terminal on the Kingdom’s Gulf coast.

The attack comes amid escalating tensions between Iran, Iranian-backed militias and Israel. On Monday, missiles reportedly fired by Iran and its proxies struck targets in Israel and several Arab states, with unconfirmed reports suggesting impacts near the US Embassy compound in Kuwait. In response, Israel and the United States carried out airstrikes on sites in Iran. Separately, Kuwait’s defence ministry said “several” American warplanes crashed within its territory amid the unrest. While details remain limited, authorities confirmed that the pilots were hospitalised and are in stable condition.

Energy sector under strain
Iranian military has now started targeting energy facilities in the region. The attack comes at a moment of acute strain for the global oil market. Crude prices have recorded their sharpest four-year surge as the expanding Iran conflict has effectively paralysed shipping through the Strait of Hormuz, the narrow waterway that carries nearly 20% of the world’s daily oil flows. Although Tehran has not formally shut the route, several shipowners have suspended voyages citing mounting security risks, creating a de facto bottleneck in one of the world’s most vital energy corridors.

Energy markets are now bracing for a prolonged spell of instability. Any sustained disruption to Gulf exports — particularly if the Strait of Hormuz remains effectively frozen — could tighten global supplies just as demand gathers pace, raising the spectre of renewed inflationary pressures worldwide. Brent crude climbed to around $80 a barrel in early trade as traders factored in escalating supply risks from the Gulf.

The conflict entered a more volatile phase over the weekend after the United States and Israel launched missile strikes on targets across Iran on Saturday, urging citizens to rise against the Islamic regime. Tehran retaliated with a wave of attacks on Israel and on US military bases and other installations in Saudi Arabia, Qatar, the United Arab Emirates, Kuwait and Bahrain, further heightening fears of a broader regional confrontation.

Historic surge in oil prices
Crude oil prices have witnessed a historic surge, with Brent jumping 13 percent to hit a 14-month high of US$ 82 a barrel. This explosive movement follows coordinated military strikes by the U.S. and Israel against Iranian targets, leading to the reported closure of the Strait of Hormuz. With approximately 20 percent of global oil supply now at risk, the market is pricing in a massive geopolitical risk premium. Despite a higher-than-expected production increase from OPEC+, the sheer scale of the potential supply disruption has sent traders into a buying frenzy, eyeing the psychological US$ 100 a barrel mark.

Reports of the Strait of Hormuz closure have put 20 million barrels per day of global supply at risk. The crude oil market has undergone a dramatic transformation, shifting from a period of seasonal weakness into a high-volatility rally. Following the news of military escalations in the Persian Gulf, Brent crude spiked from US$ 73 a barrel to a peak of US$ 82 a barrel, while West Texas Intermediate (WTI) surged over 8% to near US$ 77 a barrel. This represents the sharpest single-day percentage gain for the commodity in over a year.

Energy fundamentals
The fundamental landscape is being reshaped by more than just military action. While OPEC+ agreed to increase production by 206,000 barrels per day starting in April, market participants view this as a "drop in the bucket" compared to the potential loss of Iranian and Gulf exports. Furthermore, U.S. commercial crude inventories had already shown an unexpected draw of 9 million barrels earlier in February, leaving the global supply chain with thin buffers. As shipping insurance costs skyrocket and tankers are diverted, the market is bracing for a structural repricing of energy for the remainder of 2026.

Finally, Crude oil is in a state of high-alert, with US$ 90– 100 a barrel now a realistic short-term target if supply routes remain blocked. Investors should expect extreme volatility as geopolitical headlines dominate price action.

DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com