Oil Jumps 4% as Houthi Missiles Target Saudi Arabia, Iranian Flights Halted

Oil prices climbed roughly 4% to a one-week high on Thursday after Yemen's Iran-backed Houthis launched missiles at Saudi Arabia and diplomatic efforts between Washington and Tehran showed scant progress.

Brent futures gained $4.10, or 4.0%, to $107.18 a barrel, while US West Texas Intermediate rose $3.66, or 4.0%, to $95.82. The move extended Brent's two-day advance to about 8%, putting it on track for its highest close since September 15. WTI was set to rise for the first time in seven days after shedding about 13% over the previous six sessions.

Saudi Arabia intercepted six ballistic missiles fired by the Houthis on Thursday, the Saudi-led coalition in Yemen said, foiling attacks on the southern province of Taif and the Yanbu area on the Red Sea.

Iranian flights to Gulf neighbours, including the travel hub Dubai, appeared to have been cancelled after a US deadline passed for global firms to stop working with Iran's airlines. The measure is part of a campaign US President Donald Trump has called "economic D-Day." With the US-Israeli war against Iran largely stalemated on the battlefield for months, Washington has shifted tactics to extend the reach of its financial sanctions by targeting companies from third countries that do business with Iranian firms, a practice known as secondary sanctions.

Iran warned on Wednesday that it would retaliate against any neighbouring countries complying with the US ban on its flights by making their airports "unusable." A senior Iranian official said Tehran and Washington remain far apart on how to end their war but that diplomacy must continue, after Iran's president told the UN General Assembly that Tehran would never surrender to US pressure.

Separately, Saudi Arabia is building up crude pumping volumes through its East-West Pipeline to its Red Sea export hub of Yanbu, though crude tanker loadings have yet to resume, according to industry sources, satellite imagery and shipping data.

Diesel prices have hit record highs in recent weeks, with high-level contacts between the European Union and the United States ongoing amid a reported US plan to ban diesel exports that the EU believes would hurt both sides. Politico reported the US was preparing a 90-day ban on diesel exports ahead of the November midterm elections, though US Energy Secretary Chris Wright has disputed that. Analysts have warned such a ban would do little to ease high energy prices and could worsen global supplies. US diesel futures were up more than 5% in late morning trade.

The premium of Brent crude over WTI rose to its highest since May for a second straight day. A wider Brent premium makes it more economic for energy firms to send vessels to the US to pick up crude for export, but analysts noted chartering costs have soared in recent months, curbing US crude exports from record highs earlier this year. Weekly US crude exports were just 3.3 million barrels per day in the week ended September 18, according to US Energy Information Administration data, down from a weekly record of 6.4 million bpd in April when ship charter costs were much lower.