Oil surges as Houthis strike and Hormuz talks flop

Global markets opened the week under pressure as a planned meeting between Iran and Gulf Arab states on reopening the Strait of Hormuz to shipping was postponed on Monday, deepening uncertainty over the Middle East conflict that has dominated trading for weeks.

The talks, which were to have been hosted by Oman and were expected to see Iran formally present a temporary arrangement for monitoring traffic through the strait, were called off after Saudi Arabia's East-West pipeline was forced to shut down last week following a drone attack launched from Iraq.

The pipeline, which has a capacity of around seven million barrels a day, is a key alternative route that allows Saudi crude to reach Red Sea export terminals without passing through the strait.

Riyadh has not disclosed the extent of the damage or how long the line will remain closed, Fiona Kelliher and Barbara Angopa reports for Al Jazeera.

Brent crude jumped by roughly 3% in early trade to above $107 a barrel, a fresh four-month high, having already surged around 9% over the course of last week.

Gold, by contrast, slipped further, trading near $4,330 an ounce – its third straight weekly decline – as a firmer dollar and mounting bets on further Federal Reserve policy tightening ahead of Wednesday's rate decision dulled its usual safe-haven appeal.

Equity markets across Asia sold off sharply on the news.

Japan's Nikkei 225 fell more than 1%, extending Friday's 1.9% drop, while South Korea's Kospi shed around 2%. Hong Kong's Hang Seng slipped further into a fourth consecutive losing session, and US index futures pointed to a weaker open on Wall Street, with Nasdaq futures down more than 1%.

Separately, Yemen's Houthi rebels said they had launched a large-scale ballistic missile and drone attack on Saudi Arabia's King Khalid Air Base in Khamis Mushait, claiming “direct hits”, according to a live report by Fiona Kelliher and Barbara Angopa for Al Jazeera. There was no immediate response from Riyadh. The Iran-aligned group also said it had seized further strategic islands in the southern Red Sea, tightening its grip on the Bab al-Mandeb shipping route – another chokepoint now drawing close attention from energy markets already unsettled by the standoff over Hormuz.