Brent crude futures shed $1.01 to settle at $103.77 a barrel by 0020 GMT, marking the third consecutive daily decline. US West Texas Intermediate (WTI) futures mirrored this trend, dropping $1.03 to $100.88. Both benchmarks had closed about 1% lower on Thursday, signaling a sustained retreat from the panic highs seen earlier in the week.
The market is shrugging off fresh geopolitical flashpoints. On Thursday, Saudi Arabia and Yemen’s Iran-backed Houthis exchanged strikes across their border, widening the conflict. Yet, investors appear more focused on logistics than gunboat diplomacy. The key factor is the damage to Saudi Arabia’s East-West pipeline, an attack that suspended loadings at the Red Sea hub of Yanbu. Traders estimate a prolonged shutdown could cut 4% of global supply, but current sentiment suggests that fear is overblown.
Riyadh is working fast. Satellite imagery and industry sources confirm three pumping stations were damaged, but US Energy Secretary Chris Wright insists crude should flow through the pipeline again within days. Saudi Arabia is also pivoting to alternative routes, offering Asian refiners extra cargoes through ship-to-ship transfers off Oman’s Sohar port. This maneuver aims to replace the lost Yanbu volumes and keep global supply chains intact.
Uncertainty lingers in the Strait of Hormuz. The Iranian Revolutionary Guards Navy reported striking a Togo-flagged tanker for "illegal passage" on Thursday. JPMorgan noted it has no clear baseline view for oil markets for the first time since the US-Israeli war on Iran began, highlighting the fragility of the situation. With the interim peace agreement collapsed and no talks held since June, diplomatic resolution remains distant.
The diplomatic front will heat up next week at the UN General Assembly, where an Iranian delegation is expected to attend. For now, the price action hinges on a single variable: can Saudi Arabia restore its pipeline capacity and execute those Sohar port transfers quickly enough? If the flow resumes, the premium on risk will likely evaporate, keeping prices near $100 rather than spiraling higher.