Oil prices eases as Saudi supply recovery offsets Houthi attacks, US-Iran tensions

Oil prices softened on Monday as markets turned their attention to indications of a recovery in Saudi Arabian crude shipments, despite ongoing attacks by Iran-backed Houthis in Yemen and heightened tensions between the United States and Iran. Brent crude futures declined by 81 cents, or 0.78%, to $103.06 a barrel, following a 0.91% drop on Friday. US West Texas Intermediate (WTI) crude also fell by 89 cents, or 0.89%, to $99.41 a barrel, after sliding 1.58% the previous day.

These price declines came despite reports of recent Houthi assaults, including an attack on key Saudi Aramco facilities in Riyadh and Yanbu. The group claimed responsibility for targeting sensitive sites in Saudi Arabia's capital with missiles and drones on Saturday, as well as an Aramco facility in Yanbu, a crucial oil export hub on the Red Sea.

In response, Aramco ramped up exports through the Strait of Hormuz this month and into the next, according to traders quoted by Reuters. This shift has contributed to a recovery in Saudi exports, which reached over 4 million barrels per day (bpd) in September, up from 2.4 million bpd in August, the lowest level since at least 2013.

Despite the disruptions to Saudi Arabia's East-West pipeline, Middle East oil flows have remained robust, according to JPMorgan analysts. Total oil flows averaged 17.1 million bpd over the previous ten days, about 6.1 million bpd lower than the 2025 average. Saudi Arabia's oil flows through the Strait of Hormuz averaged 2.9 million bpd over the past six days, a significant increase from 700,000 bpd in August.

China has urged Iran to assist in curbing the Houthis' activities following the attacks, based on three Iranian sources familiar with the situation.

Meanwhile, Iran and the US continued to exchange threats on Sunday, as efforts to resolve the ongoing stalemate remained largely fruitless. US President Donald Trump expressed openness to meeting Iranian President Masoud Pezeshkian, who is anticipated to attend the United Nations General Assembly in New York this week. Iran has conveyed conditions to mediators for restarting negotiations aimed at ending the conflict with the US, according to Al Jazeera, citing Iran's security chief Mohsen Rezaei.

Asian shares rose on Monday, buoyed by gains in chipmakers as demand for artificial intelligence technology continued to bolster the sector. Oil prices eased as optimism about stronger Saudi supplies outweighed concerns over the latest Houthi attack. Trading activity was relatively restrained, with Japan's markets closed for the Silver Week holiday through Wednesday. The dollar remained stable at 157 yen, and investors remained cautious about potential intervention by Japanese authorities to support the currency.

Japan's Nikkei index was closed, although futures rose by 0.5%, while South Korea's tech-heavy index gained 1.1%, and MSCI's Asia-Pacific index outside Japan increased by 0.3%. S&P 500 futures climbed by 0.3%, and Nasdaq futures gained 0.4%. In Europe, EUROSTOXX 50 and DAX futures rose by 0.2%, while FTSE futures were unchanged.

Bond markets faced pressure following a sharp sell-off that pushed US two-year Treasury yields up by 36 basis points over the past two weeks to 4.7604%, the highest level since mid-2024.