Oil prices swing as Yemen conflict escalates and West Asia war stalls

Oil prices saw significant volatility on Monday, October 5, as traders reacted to shifting dynamics in the West Asia conflict and renewed fighting in Yemen. Brent crude for December delivery briefly rose above $103 per barrel before settling around $102, extending last week's nearly 5% gain. Meanwhile, West Texas Intermediate (WTI) slipped 0.6% to $90.60 per barrel.

The uncertainty stemmed from a stalled West Asia war juxtaposed with escalating violence in Yemen. The Saudi-backed Yemeni government launched a major military campaign to reclaim territories held by the Houthi militants. Rashad Al-Alimi, head of the Presidential Leadership Council, declared the nation would fight "until the liberation of the country from the grip of the terrorist Houthi militia." The Houthis, backed by Iran, have intensified attacks on Saudi Arabia, including strikes on oil facilities, disrupting the world's largest crude exporter.

Despite the turmoil, OPEC+ members decided to maintain their current output quotas for November. However, traders remained wary of potential flare-ups in the conflict, particularly as the U.S. increases its military presence in the Gulf region. Iran continues to target ships in the Strait of Hormuz, a critical waterway for global oil trade. Additionally, global crude inventories have dropped to a five-year low, further supporting higher prices.

Even the Group of Seven's announcement to release up to 100 million barrels of emergency oil and diesel stocks failed to ease market concerns. Brent crude remains roughly 40% higher than before the conflict began, reflecting lingering anxieties over supply disruptions.