Oil Prices Drop as Middle East Tensions Ease

Oil prices dropped on Friday but remain poised for an 8% weekly gain, despite concerns over supply disruptions in the Middle East. Brent crude futures settled at $104.61 a barrel, down $3.02 or 2.81%, while US West Texas Intermediate crude finished at $100.05 a barrel, down $2.43 or 2.37%. Both benchmarks hit their highest levels since mid-May on Thursday but reversed gains after reports of potential talks between foreign ministers in the Middle East and Iran to manage shipping through the Strait of Hormuz.

The news sparked a re-evaluation of risk by traders, with some saying that the market may remain calm over the weekend. However, others warned that supply disruptions could continue, citing satellite imagery showing smoke near Saudi Arabia's East-West Pipeline and reports of damage to a pumping station on the pipeline.

Saudi Arabia's crude supply fell by 2.3 million barrels per day in August to 6 million bpd, the lowest level in over three decades, according to the International Energy Agency. Meanwhile, Yemen's Houthis reached the island of Perim in the Bab el-Mandeb Strait, potentially tightening their grip on one of the world's vital shipping routes.