Oil prices moved sharply lower on Monday as investors reacted to hopes for easing Middle East tensions and signs that Saudi oil exports were recovering.
The decline came despite continued fighting in Yemen and persistent geopolitical risks across the region.
By 09:44 ET (13:44 GMT), Brent crude futures were down 3.1% at $100.62 per barrel, while U.S. West Texas Intermediate crude fell 3.9% to $96.38 per barrel.
Oil Prices Fall Despite Geopolitical Risks
Analysts at ING said the pullback came even though concerns over global oil supply disruptions remain elevated.
Profit-taking after recent gains also contributed to the decline.
At the same time, investors were encouraged by hopes for constructive diplomatic discussions during this week’s United Nations General Assembly.
Market sentiment was also supported by expectations surrounding an upcoming meeting between U.S. President Donald Trump and Chinese President Xi Jinping.
Brent Crude Extends Recent Losses
Brent crude ended the previous week lower as signs of possible diplomatic progress reduced some concerns about supply disruptions.
Efforts to restore Saudi oil flows also helped ease fears that the Middle East conflict could severely restrict crude exports.
However, the regional security situation remains fragile.
Yemen Fighting Raises Red Sea Supply Risks
Fighting between Iran-backed Houthi forces and Saudi-aligned troops intensified over the weekend.
Both sides are competing for control of strategic positions in southwestern Yemen.
The area is important because it overlooks the Bab el-Mandeb Strait, one of the world’s most important maritime shipping routes.
Control of nearby high ground could provide additional leverage over vessels traveling through the waterway.
Bab el-Mandeb Remains Critical for Saudi Oil Exports
The Bab el-Mandeb Strait connects the Gulf of Aden with the Red Sea and serves as a major route for global energy shipments.
Its importance has increased because Saudi Arabia has relied more heavily on the route amid disruptions surrounding the nearby Strait of Hormuz.
Any significant escalation near Bab el-Mandeb could therefore increase risks for global oil supplies and shipping costs.
Houthis Claim Attacks on Saudi Arabia
The Houthis said they launched missiles and drones toward Riyadh on Saturday.
The group also claimed to have targeted Saudi oil infrastructure in response to Saudi military operations inside Yemen.
The escalation has added another layer of uncertainty to an already volatile regional energy outlook.
U.S. Closely Watches Yemen Conflict
President Trump has reportedly stopped short of providing direct military support requested by Saudi Crown Prince Mohammed bin Salman.
However, Washington appears to be closely monitoring developments.
Trump also spoke with Yemen’s president on Sunday as concerns grew over the wider regional conflict.
U.S.-Iran Tensions Remain Elevated
The United States and Iran continued to exchange warnings as their conflict showed few signs of a rapid resolution.
Trump warned Iran’s leadership against refusing to pursue an agreement.
Iranian military officials, meanwhile, said Tehran would respond to any renewed attacks.
These tensions continue to create significant uncertainty for global oil markets.
Saudi Oil Exports Show Signs of Recovery
Despite the geopolitical risks, recent data suggested that crude oil was continuing to move out of the Gulf region.
Figures from shipping analytics firm Kpler showed that Saudi oil exports recovered to slightly above 4 million barrels per day in September.
That compares with approximately 2.4 million barrels per day in August.
The improvement helped reduce some immediate concerns over global crude supply.
Saudi Arabia Seeks to Restore East-West Pipeline
Saudi Arabia is also attempting to restore flows through its damaged East-West pipeline.
The pipeline provides an important alternative route for crude exports because it allows oil to move toward the Red Sea without relying entirely on the Strait of Hormuz.
Saudi officials hope operations can resume quickly, although some analysts remain uncertain about how soon full capacity can be restored.
Gulf Energy Shipments Increase
The head of U.S. Central Command said that the volume of crude oil, cargo and liquefied natural gas moving through the Gulf during the previous two weeks was higher than at any point in the past six months.
The increase in energy shipments has helped calm some fears of an immediate supply crisis.
Oil Market Balances Diplomacy and Supply Risks
Oil traders are now balancing two competing themes.
On one side, diplomatic hopes and improving Saudi exports are reducing immediate supply concerns.
On the other, continued fighting in Yemen, tensions with Iran and risks surrounding major shipping routes remain significant threats to the global energy market.
For now, oil prices remain highly sensitive to developments involving Saudi Arabia, Iran, Yemen and the Bab el-Mandeb Strait.
