Oil Prices Drop 1% as Saudi Defense Minister Meets Iran to Ease Tensions

Crude oil prices declined on Monday amid diplomatic talks between Saudi Arabia and Iran aimed at reducing regional tensions. U.S. West Texas Intermediate futures fell 1% to $102.17 per barrel by late morning, while Brent crude futures slipped 0.2% to $116.49 per barrel.

These price declines followed a sharp rally on Friday triggered by repeated attacks from Iran-allied Houthi militants on Saudi Arabia. The attacks raised concerns about potential disruptions to global energy supplies, especially given that global oil inventories have significantly depleted after eight months of conflict. For instance, the U.S. Strategic Petroleum Reserve is currently at its lowest level since 1982.

Saudi Defense Minister Prince Khalid bin Salman traveled to Tehran to meet Iranian President Masoud Pezeshkian and National Security Council chief Mohsen Rezaei. Pakistani Army Chief of Staff Asim Munir and Turkish intelligence head Ibrahim Kalin are also involved in the talks, with Pakistan and Turkey being members of a defense pact with Saudi Arabia. The Houthis have continued attacks on Saudi infrastructure, including the main Riyadh airport and oil facilities, sustaining tensions.

Michael Alfaro, Chief Investment Officer at Gallo Partners, estimated that geopolitical uncertainty has added about $20 per barrel to oil prices. He warned that a major strike on Saudi Arabia’s pipeline or refining infrastructure could push prices higher, potentially to Brent levels above $120, which could reduce demand due to higher costs. Continued instability highlights risks to refining capacity, potentially affecting global energy markets longer term. This matters for investors as oil price volatility linked to geopolitical risks can impact costs and profits for energy companies and broader economic activity.