Middle East Supply Recovery Uncertainty Weighs on Oil Prices

Oil prices fell at the start of the week due to conflicting reports about the restoration of supplies from the Middle East. The initial rise in Brent crude futures following a Houthi attack on Saudi Arabia's capital over the weekend was later followed by a decline of around 2% as expectations grew that the kingdom would quickly restore some supplies through the East-West oil pipeline.

According to Admiral Brad Cooper, head of the U.S. Central Command, the volume of crude oil cargo and liquefied natural gas shipments over the past two weeks had been the highest in at least six months. However, shipping data points to significantly lower activity, with only 12 vessels carrying commodity cargoes crossing the Strait of Hormuz on Saturday and Sunday, compared with 35 the previous weekend.

Despite the uncertainty surrounding oil exports, markets responded positively to falling oil prices. Lower oil prices supported most stock markets, including those in Japan, South Korea, and Europe. The euro held near $1.1484, while the dollar fell below 157 yen amid concerns that the Bank of Japan could take advantage of low liquidity to intervene in the foreign-exchange market.