The bypass breaks, both banks hike

In the second week of September, drones launched from Iraq damaged Saudi Arabia’s East-West pipeline, which can carry 7 million barrels a day from the Gulf to the Red Sea coast, and Riyadh shut it⁴. It was the main route by which Saudi crude avoided Hormuz. Kpler estimated the market could lose 120 million barrels if it stayed closed for a month⁴. Andy Lipow of Lipow Oil Associates summed it up: “The longer the shutdown, the higher the price”⁴.

Two prices again. Brent futures settled at $105.68 on Monday 14 September, after nearly touching $110⁴. The EIA’s spot price for a physical North Sea barrel was $121.25 that day and $130.80 the next⁵. If you heat a building or run a fleet, the second number was yours.

Frankfurt had moved the same week. On 10 September the ECB raised its three key rates by 25 basis points, the deposit rate to 2.50% from 16 September, saying inflation “is set to remain well above target for an extended period”¹. Its staff now projected inflation of 3.0% this year and 2.5% next, and it repeated that it was “not pre-committing to a particular rate path”¹.

Washington followed, on the very day the ECB’s increase took effect. On 16 September the Federal Open Market Committee raised the federal funds range by a quarter point to 3.75% to 4%, by twelve votes to none, saying the move “will support a timelier return to the Committee’s 2 percent goal”². In July the same committee had held by nine votes to three, with three members already asking for this increase³. The dissent was the forecast; the September vote was the receipt.

What the chart says, and what it does not. It shows two central banks that spent 2024 and 2025 cutting, and 2026 reversing^6,7. It does not show that they were wrong to cut; the energy shock that changed their minds began in February. Reading hindsight into a rate path is the easiest mistake in finance. The honest reading is narrower: when the price of energy is set by a corridor, policy is set by how long the corridor stays shut.

For you, the useful conclusion is the dull one. If your loan, your deposit or your rent is linked to either of these lines, the committees have told you plainly that they are watching the tank, not the screen, and that they will not promise the next step in advance.