Oil prices soared Monday as a weekend attack on Saudi facilities and discussions among European Union members over banning Russian crude raised concerns about global supplies.

Top producer Saudi Arabia warned that Yemeni rebel attacks on the kingdom’s oil facilities pose a “direct threat” to global supplies, while Baltic states indicated they would favor an embargo of Russian crude in retaliation for its invasion of Ukraine.

The comments propelled crude prices higher, with both Brent and West Texas Intermediate gaining more than 7% to climb above US$110 a barrel.

“We saw what happened when the US first floated the idea of the EU banning (crude) imports… and if this becomes a realistic prospect, we could see oil prices rising much further,” Oanda analyst Craig Erlam said.

Wall Street dipped after Federal Reserve chair Jerome Powell said the US central bank is prepared to raise interest rates by bigger steps than the quarter-point hike announced last week if that is what is needed to contain “much too high” inflation.

“The harsh reality of faster rate rises is setting in for some traders and that could eventually lead to a taper tantrum which might happen alongside stagflation,” Edward Moya of Oanda said.

“Monetary policy is still accommodative for now, but that could quickly change if the Fed delivers a couple supersized rate hikes by the summer.”

The Dow and Nasdaq both closed about half a percentage point lower, while the S&P 500 ended flat.

European equities finished slightly in the red – though London had added half a percent at the close – after Ukraine rejected a Russian ultimatum to surrender its besieged southern city of Mariupol.

At a meeting Monday, EU nations remained split over banning Russian energy imports, with Germany, reluctant given its huge reliance on Russian gas. But a top official from the bloc decried “a massive war crime” being carried out by Moscow in Mariupol.

Kremlin spokesman Dmitry Peskov warned that an oil embargo “is a decision that will hit everyone.”

Drone strike

An attack by Yemeni rebels on facilities belonging to oil giant Saudi Aramco on the Red Sea also pushed crude prices higher.

Drone and missile strikes by Yemen’s Iran-backed Huthi rebels over the weekend caused no reported casualties, but the Saudi energy ministry said the assault “led to a temporary reduction in the refinery’s production, which will be compensated for from the inventory.”

The Saudi-led military coalition that backs Yemen’s government said it intercepted and destroyed ballistic missiles and drones launched towards Jizan and other areas in the kingdom, causing “damage” to several sites.

“It’s officially a temporary outage but still has undermined the effect of Saudi Aramco’s pledge to ramp up production in coming years,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

The Saudi foreign ministry said the kingdom “will not incur any responsibility” for shortages in oil supplies in light of the Huthi attacks but noted a “direct threat to the security of oil supplies in these extremely sensitive circumstances witnessed by the global energy markets.”