Middle East Tensions Keep Oil Prices Elevated Despite Price Dip
Oil prices retreated from four-month highs at the end of the week, but concerns about Middle East shipping routes kept the market's geopolitical risk premium intact.
Brent crude settled Friday down 2.8% at $104.61 a barrel, while West Texas Intermediate fell 2.4% to $100.05. Both remained sharply higher on the week after Brent traded above $108 and WTI topped $104.
The decline followed signs of possible diplomacy, with Iranian and Gulf officials expected to meet in Oman on Monday to discuss shipping through the Strait of Hormuz. US President Donald Trump also said he expected the Iran war to end shortly after November's mid-term elections, adding that oil would 'come tumbling down' once hostilities cease.
However, supply risks remain elevated due to Saudi Arabia shutting its 7 million-barrel-a-day East-West pipeline as a precaution after drone attacks. Houthi advances around Yemen's Red Sea coast have also raised concerns over traffic through the Bab el-Mandeb Strait.
RBC Capital Markets analyst Helima Croft noted that if fighting continues, Brent could rise above $120 a barrel by year-end.