Deadly Drone Strikes on UAE Raise Gulf Tensions, Roil Oil Market

(Bloomberg) --

Iran-backed Yemeni fighters launched drone strikes on the United Arab Emirates that caused explosions and a deadly fire outside the capital, Abu Dhabi, ratcheting up security risks in the major oil-exporting region at a critical time.

One of the biggest attacks to date on UAE soil ignited a fire at Abu Dhabi’s main international airport on Monday and set fuel tanker trucks ablaze in a nearby industrial area. It took place days after Yemen’s Houthi fighters warned Abu Dhabi against intensifying its air campaign against them. 

Crude extended gains to the highest level in seven years on Tuesday after the assaults in the UAE, OPEC’s third biggest oil producer.

Iran’s longtime support of the Houthis means the incidents could roil regional diplomatic efforts to ease frictions and separate talks to restore Tehran’s 2015 nuclear deal with world powers.  

The attack underscores the threat against regional civilian and energy infrastructure,  said Torbjorn Soltvedt, an analyst at risk intelligence company Verisk Maplecroft. 

“Reports of damage to fuel trucks and storage will concern oil market watchers, who are also keeping a close eye on the trajectory of ongoing nuclear talks between the U.S. and Iran,” he said. “With negotiators running out of time, the risk of a deterioration in the region’s security climate is rising.” 

A preliminary investigation suggests drones fell in both incidents and may have triggered the blasts, the UAE’s state-run WAM news agency said. Three people -- two Indians and one Pakistani -- were killed and six others injured in the fuel-tank fire close to the storage facilities of state-run oil group Adnoc, Abu Dhabi police said. Adnoc said the attack took place at 10 a.m. local time and that the casualties were all employees. 

As Mideast Rivalries Cool, Power and Leverage Begin to Shift

The Persian Gulf has seen a series of attacks on shipping and oil facilities since the U.S. withdrew from the nuclear deal with Iran in 2018. Washington has blamed the attacks on Iranian-backed militias, including the Houthis in Yemen, where a Saudi-led military coalition including the UAE has been battling the group since 2015.

The Houthis regularly attack the UAE’s neighbor Saudi Arabia with missiles and drones, and a strike on a major Saudi oil facility in 2019 shook global oil markets and raised fears of a new conflict in the Middle East. 

Strategically Significant

Yemen is strategically significant because it lies on a waterway linking the Red Sea and the Gulf of Aden that is a conduit for much of the world’s oil. The conflict there has killed tens of thousands of people and helped create one of the world’s worst humanitarian crises.

The Houthis were behind the attack but were “too weak to impact the security and stability” of the country, said Anwar Gargash, an adviser to the UAE presidency. 

One Houthi leader said the group would carry out more attacks on the UAE. “This operation is a prelude and there are still a lot of surprises in the pocket of our military forces,” Abdulmalik Al-Ejri told Al-Masirah. 

A Houthi spokesman said the attack involved five ballistic missiles as well as armed drones. It was not immediately possible to verify the information.

The group had also targeted Dubai’s airport, the spokesman Yahya Saree said in a statement. UAE authorities did not report any attack in Dubai, the country’s commercial hub, which is currently hosting Expo 2020.

The UAE will respond by asking the U.S. to put the Houthis back on its list of terrorist organizations and look to build up pressure through the UN Security Council, a person familiar with government thinking said. The U.S. removed the designation a year ago as part of a push to end the Yemen war, but efforts have floundered.

UAE to Ask U.S. to Restore Houthi Terrorism Label After Attack

The Houthis also claimed previous attacks on the UAE in 2017 and 2018. The UAE began withdrawing from Yemen in late 2019, partly to avert attracting strikes on its own soil, but maintained links to separatist groups and has increased airstrikes in recent weeks. The latest assault follows an uptick in maritime attacks in recent weeks as talks to revive the nuclear deal enter a critical stage.

“In the past year, we’ve seen a fierce escalation on multiple fronts in Yemen,” said Fawaz Gerges, Middle Eastern politics professor at the London School of Economics. 

“The talks by the UAE and Saudi with Iran, whether secret or public, have not been enough to obscure the geopolitical and strategic rivalries that are continuing to unfold.”

(Updates with oil prices)

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