The recent rally in oil prices paused as traders took profits, but tensions in the Middle East and Russia kept supply risks in focus. Brent oil dipped below $106 a barrel, while West Texas Intermediate saw a slight gain, reflecting a cautious market adjusting positions amid geopolitical uncertainties.
Saudi Arabia intercepted more attacks from Yemen’s Houthis, raising concerns about potential disruptions to oil exports from the region’s largest exporter. Meanwhile, Iranian attacks on ships in the Strait of Hormuz have increased, threatening Persian Gulf oil exports. Crude prices have surged over 70% this year due to Middle East supply disruptions, with oil derivatives like diesel seeing even larger gains.
US President Donald Trump’s recent deal for Russian diesel and an energy ceasefire between Moscow and Kyiv has drawn skepticism. Mark Hackett, chief strategist at Nationwide Funds Group, noted that while the prospect of increased Russian diesel limited price movements, the deal’s viability remains uncertain. Russia’s crude shipments have also declined as operations at its key Black Sea port slowed.
A Houthi attack on Riyadh’s airport over the weekend killed at least 16 people, including a US citizen, and wounded about 300. Trump has indicated he might join Saudi-backed strikes against the Houthis. Karen Young, a senior research scholar at Columbia University, warned that Saudi retaliation could escalate tensions and impact oil exports.
Saudi Arabia is working to bolster its oil export capacity without relying on the Strait of Hormuz. Saudi Aramco could add 1.2 million barrels a day of export capacity within seven to eight weeks by repurposing gas pipelines. Despite recent attacks, crude flows in the Strait of Hormuz have approached prewar levels, and Saudi Arabia has restored flows through a critical pipeline to the Red Sea.