Oil pulls back as Mideast risk premium adjusts

US West Texas Intermediate (WTI) crude futures were down 92 cents, or 0.9%, at $101.86, after dropping as low as $101.75 a barrel.

Brent crude (UKOIL) prices also eased, with one session seeing Brent fall toward $114 a barrel after rising by more than 1% the day before. In another trading day, Brent crude futures settled down $1.93, or 1.67%, at $113.88 per barrel, while WTI settled down $1.86, or 1.83%, at $99.90. These moves left both benchmarks near six‑month highs, underscoring that while prices have slipped, they remain elevated after recent spikes.

Market attention remains trained on a series of security incidents that have heightened perceptions of supply risk. Yemen’s Houthis attacked Aden airport, after previously warning people to evacuate the site as fighting intensified. The group also said it had hit Saudi Arabia’s biggest oil refinery with a missile, targeting facilities in the world’s second‑largest crude producer, though Saudi authorities did not immediately confirm the strike on the 550,000‑barrel‑per‑day plant.

More broadly, October has been the worst month since 2017 for attacks on commercial shipping in the Strait of Hormuz and nearby waterways, based on tracked maritime security incidents. Traffic through the strait has increased even as the number of vessel attacks has risen, contributing to continued concerns that regional tensions could further disrupt flows of crude and refined products.

Alongside the conflict risks, traders are responding to diplomatic initiatives aimed at de‑escalation. Brent’s latest declines have been linked to Middle East talks that have eased some immediate supply fears, even though an agreement to end the US‑Israeli war with Iran remains out of reach. Iran’s Foreign Minister Abbas Araghchi has said Tehran continues to give diplomacy a chance, while Iranian Security Council chief Mohsen Rezaei has held meetings with Saudi, Turkish and Pakistani representatives, followed by talks with Supreme Leader Ayatollah Mojtaba Khamenei.

Qatari mediators have also presented Iran with a draft deal to end the war with the US and Israel, though a senior Iranian official described the proposals as unacceptable ideas rather than a formal offer. These diplomatic contacts have encouraged some unwinding of the recent risk premium in crude, with analysts noting that headlines around negotiations have prompted profit‑taking after multi‑month price peaks driven by maritime security disruptions.

Despite the pullback, structural constraints are keeping oil markets tight. Gulf crude exports have fallen for a fourth consecutive week, with Strait of Hormuz transit volumes running at roughly 60% of normal capacity. Earlier in the week, Brent prices had surged to more than $117 per barrel, the highest level since April, after a wave of Iranian attacks on tankers near the strait underscored the vulnerability of key shipping lanes.

Analysts highlight that there remains a significant risk premium in crude linked to the possibility of US and Israeli military action against Iran in the coming weeks. One major bank expects Brent to stay elevated near $110 per barrel through the end of the year, raising its end‑year forecast from a prior $100 per barrel. These expectations, combined with ongoing shipping disruptions and refinery‑targeting attacks, help explain why oil prices, though off recent highs, continue to trade at historically elevated levels.