Oil on track to remain above $100 for second straight week as Middle East tensions simmer

Oil prices held steady above $100 for a second consecutive week, despite tensions escalating in the Middle East, according to recent market data. Brent crude, which represents two-thirds of the world's oil, fell 1.35 percent to $103.41 a barrel. West Texas Intermediate (WTI), the benchmark for US crude, dropped 0.39 percent to $101.51 per barrel.

Both benchmarks had risen by over 2 percent earlier in the day. Brent is on track for a 1.15 percent decline from last week's close, while WTI is expected to add 1.15 percent. Financial markets have largely disregarded the energy price volatility, as they have already accounted for a significant portion of the $100 per barrel level, according to Hou Wey Fook, chief investment officer of DBS Bank.

For oil to significantly impact financial markets, prices would need to rise to $160, a scenario that is considered unlikely. Concerns about Saudi supply disruptions were outweighed by anxiety over escalating Middle East conflict, as fighting resumed between Saudi Arabia and Houthi rebels in Yemen. The situation intensified after Saudi Arabia shut its East-West pipeline following attacks, deepening fears of a global supply crunch.

Despite the geopolitical risks, oil prices have moved in line with developments surrounding a potential resolution. However, the lack of resolution has led to a significant geopolitical premium in oil prices, according to Nagham Hassan, a Middle East and North Africa market analyst at eToro. The outlook for oil over the next six months will depend heavily on the conflict's direction, with further escalation around the Strait of Hormuz or Bab Al Mandeb, as well as ongoing strikes on Russian refineries, potentially increasing the risk of a genuine supply shortage and keeping prices well above $100 per barrel.