U.S. oil prices fall as Middle East conflict drives supply risk reassessment

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US oil prices fall on risk

Highlights

U.S. West Texas Intermediate crude futures fell 0.9% to $101.86 a barrel Thursday, partially reversing Wednesday's 3% rally on geopolitical tensions.
Yemen's Houthis claimed attacks on Aden airport and reportedly targeted Saudi Arabia's largest oil refinery, raising risks to supply from the world's second-largest crude producer.
Markets weigh potential for broader infrastructure attacks and monitor Qatari-mediated proposals to Iran, despite Iranian officials dismissing the latest draft as unacceptable.

Middle East conflict reshapes crude trading

As reported by Reuters, U.S. West Texas Intermediate crude futures are down 92 cents, or 0.9%, at $101.86 a barrel on Thursday after falling as low as $101.75. The move pares back part of Wednesday's rally, when the benchmark rose 3% as investors reacted to escalating geopolitical tensions.

Traders are also tracking attacks linked to Yemen's Houthis, which government forces say struck Aden airport on Wednesday after the Iran-aligned group warned people to evacuate the site. On Tuesday, the Houthis say they hit Saudi Arabia's biggest oil refinery with a missile, marking an intensification of strikes against the world's second-largest crude producer after the U.S.

Saudi authorities do not immediately confirm the reported strike on the 550,000-barrel-per-day facility, leaving markets to assess both the credibility of the claim and the potential scale of any disruption. Even without confirmation, the threat to major production and refining assets is keeping a risk premium in oil prices.

Supply concerns and diplomacy stay in focus

Beyond immediate price swings, the market is watching whether attacks on transport, refinery and export infrastructure broaden across the region. Any sustained disruption could tighten global crude balances and increase volatility for energy buyers in Asia and other import-dependent markets.

At the same time, investors are monitoring diplomatic efforts for signs of de-escalation. Qatari mediators have presented Iran with a new draft deal to end the war with the U.S. and Israel, an official briefed on the negotiations says, although a senior Iranian official describes the proposals as unacceptable ideas that do not amount to an offer.

In our earlier article on the surge in crude oil shipping costs, we explained how conflict-related risks in areas like the Strait of Hormuz and the Red Sea have pushed tanker freight and insurance rates sharply higher. We noted that these added logistics costs can become a major part of the delivered oil price, squeezing import-dependent buyers and boosting volatility even when physical supply losses are only feared rather than confirmed.

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