Oil prices have started rising again after earlier declines, while investors continue to monitor developments in the Middle East closely. On Tuesday, 27 October, the price of Brent crude rose to around $116 a barrel, while US West Texas Intermediate (WTI) crude traded above $102. Hopes that diplomacy could contain the conflict are clashing with concerns about further attacks on energy infrastructure and oil transport.
On Tuesday morning, Brent crude futures rose by 0.4% to $116.24 a barrel. US WTI crude gained 0.3% to $102.07. Both benchmarks had previously lost ground, with Brent falling below $116 a barrel on Monday.
One factor influencing the market is the diplomatic effort to contain the conflict in the Middle East. On Monday, representatives of Saudi Arabia, Türkiye and Pakistan met Iranian officials in Tehran. The aim was to reduce tensions and maintain communication channels that could help prevent further escalation.
The prospect of an agreement is easing some concerns about oil supply disruptions. However, investors remain uncertain whether diplomatic efforts will lead to a lasting de escalation. Attacks are continuing in the region, and the security of oil infrastructure and vessels transporting crude remains a significant concern.
Further concern was prompted by the actions of Yemen’s Houthi rebels, who reported attacks on targets in Saudi Arabia, including oil pumping stations along a pipeline running from the east to the west of the country, as well as an airport in Riyadh. Saudi Arabia has also reported intercepting missiles and drones. These reports are adding to uncertainty over the security of oil production and exports.
The Strait of Hormuz under close scrutiny
The situation in the Strait of Hormuz is critical for the market. Before the conflict broke out, around one fifth of global energy supplies passed through the strait. Disruptions to shipping in the area could impede oil transport and increase the cost of delivering crude to customers.
October has seen a large number of attacks on commercial vessels in the Strait of Hormuz and nearby waters. Earlier strikes on oil tankers contributed to a sharp rise in prices. Last week, Brent crude exceeded $117 a barrel, reaching its highest level since April.
Prices remain vulnerable to further developments
The oil market is currently responding to two opposing factors. On the one hand, diplomatic talks could reduce the risk of further disruptions and trigger a correction in prices. On the other, additional attacks on oil producers or vessels in the region could push prices up again, particularly if they threaten the continuity of supplies.
Price fluctuations show that investors do not yet consider the situation stable. Even when signs of a possible agreement emerge, continuing threats to energy infrastructure limit the scale of price declines. In the near term, the direction of oil prices will depend primarily on developments in the Middle East and the actual impact of the conflict on transport and the availability of crude oil.
