In a market analysis sent to Rigzone on Thursday, Mahmoud Mashal, Senior Market Analyst at VT Markets Dubai, highlighted that both WTI and Brent oil prices were rising intraday “as escalating tensions in the Middle East revived concerns over Gulf supply”.
At the time of writing, Brent was up more than three percent and WTI was up more than two percent from Wednesday settlements.
“Friction between Saudi Arabia and the Houthis has brought the kingdom’s energy infrastructure back into focus at a time when traffic through the Strait of Hormuz remains restricted,” Mashal said in the analysis.
“The U.S. decision to withdraw some diplomatic staff from Saudi Arabia, alongside troop movements in the region, has reinforced concerns that the conflict could broaden,” Mashal warned.
“Shipping risks remain persistent, threatening operations that have helped exporters work around restrictions. Disruptions to alternative channels would make it harder for Gulf producers to maintain current export flows and could add significantly to supply concerns,” he added.
Mashal went on to note in the analysis that several buffers are limiting the upside potential of oil prices.
“Gulf crude exports have recovered significantly,” he pointed out.
“At the same time, the IEA is accelerating previously planned reserve releases, adding further supply to the market,” he added.
“Developments involving Russia provide an additional source of relief,” Mashal said.
“Prospects for progress in Russia-Ukraine talks, together with Washington’s waiver of several Russia-related sanctions, including a temporary license allowing Russian diesel to be sold on global markets until April 2027 and a waiver of secondary tariffs affecting major buyers of Russian crude such as China and India, could improve the availability of Russian crude and diesel,” Mashal continued.
Looking ahead, Mashal projected in the analysis that crude “is likely to retain an upside bias while Middle East supply routes remain exposed”.
“An escalation affecting Saudi energy infrastructure, Gulf loadings, or alternative shipping routes could push prices above their recent range,” he noted.
“Conversely, credible progress towards reopening Hormuz or a breakthrough in Russia-Ukraine negotiations would improve the supply outlook and place selling pressure on prices,” he said.
In another market analysis sent to Rigzone today, Naeem Aslam, CIO at Zaye Capital Markets (ZCM), noted that ZCM believes the renewed oil price increase “reflects growing concerns about Middle Eastern supply disruptions, persistent geopolitical uncertainty, and tightening global petroleum inventories”.
“Fresh concerns about potential military escalation involving the United States, Israel, and Iran, alongside continuing attacks affecting Saudi Arabian energy infrastructure, have increased the geopolitical risk premium embedded in crude prices,” Aslam said.
“President Trump’s recent comments concerning negotiations with Russia and the decision to delay additional sanctions suggest diplomatic efforts could eventually influence Russian energy exports,” he added.
“However, we believe limited diplomatic progress does not eliminate the broader risk of supply disruption, particularly while Middle Eastern shipping routes and energy facilities remain vulnerable,” he stated.
“His administration’s intensified cybersecurity enforcement efforts could improve protection of critical infrastructure over time, although no direct impact on crude oil supply or prices has been established,” he continued.
Aslam noted in the analysis that the global supply outlook “reinforces concerns that oil markets could remain vulnerable to further price increases despite weakening economic activity”.
“The latest OPEC+ decision to maintain September production requirements through November indicates that major producers are prioritizing market stability rather than announcing immediate additional supply increases,” he said.
“Meanwhile, the International Energy Agency’s October outlook projects global oil supply to decline by 5.8 million barrels per day in 2026 to approximately 100.7 million barrels per day, while global demand is expected to fall by 2.6 million barrels per day to 102.4 million barrels per day,” he added.
“At Zaye Capital Markets, we interpret this imbalance as evidence that supply constraints remain significant enough to support elevated crude prices even as consumption weakens,” he highlighted.
Aslam pointed out in the analysis that global petroleum inventories were approximately 509 million barrels below their pre-conflict levels at the end of September, “reinforcing concerns about limited supply flexibility”.
“Persistent diesel shortages and disrupted refinery operations are also increasing transportation, manufacturing, and distribution costs, creating additional inflationary pressure across the broader economy,” he said.
“However, we believe recovering production, improving diplomatic conditions, or weaker industrial demand could eventually reduce the geopolitical premium embedded in oil prices and trigger a broader correction,” he added.
Aslam went on to state that yesterday’s U.S. economic figures “strengthened the argument that tightening physical supply remains an important driver of oil prices, even as broader economic activity shows signs of weakening”.
Looking ahead, Aslam revealed in the analysis that ZCM believes today’s economic releases “could determine whether oil prices maintain their upward momentum or encounter renewed selling pressure”.
In a market quick take posted on its website today, Saxo Bank highlighted that Brent was up “after a deadly drone strike on Saudi Aramco’s Shaybah field, which left operations unaffected, while a separate attack on King Fahd International Airport in Dammam killed one”.
“Both incidents highlight the risk of further escalation that could disrupt supply,” the quick take warned.
Saxo Bank also noted in this quick take that oil prices “whipsawed again on Wednesday following another unsubstantiated report of a potential Qatar-Pakistan peace proposal”.
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