International oil prices edged lower on Friday. Investors digested fresh attacks between Saudi Arabia and the Iran-backed Houthi rebels in Yemen, while assessing whether additional Saudi crude can enter the global market to ease supply concerns.

Brent crude futures fell 0.94% to settle at $103.83 per barrel. US West Texas Intermediate (WTI) crude futures dropped 0.88% to $101.01 per barrel.

Middle East Tensions Flare Up Again

Saudi Arabia and Houthi rebels launched reciprocal attacks along the border on Thursday, sparking market fears that an escalation of Middle East conflicts could further disrupt energy supplies. Global energy supply has remained under pressure since US and Israeli strikes on Iran back in February this year.

Still, markets took note of reports that Saudi Arabia has found an alternative route to ship part of its crude to ASIan buyers via Oman, which has eased fears of a severe supply disruption to some extent. Previously, a key pipeline was shut down after Houthi attacks, and investors once worried that Saudi export disruptions would worsen sharply.

Partial Unwinding of Risk Premium

Simon-Peter Massabni, Head of Business Development at XS.com, stated that the recent oil price decline reflects a partial unwinding of the geopolitical risk premium rather than a fundamental shift in crude market fundamentals.

He pointed out that improved logistics for Saudi crude exports have lowered the market’s estimate of how much supply is at risk. Oil prices reflect not only the existing barrels of crude available, but also the probability that those supplies could be disrupted.

Massabni added that the Middle East supply network remains fragile. Traders are especially sensitive to developments around the Strait of Hormuz, export routes and oil and gas terminals. The speed at which Saudi Arabia restores its East-West pipeline will also be a key monitoring point.

Future Market Trend Still Hinges on Geopolitical Shifts

Massabni expects oil prices will continue to be driven more by geopolitical events than traditional supply and demand metrics in the short term. If Saudi Arabia keeps stable crude shipments to ASIa and the East-West pipeline repair progresses smoothly, oil prices may face further downward pressure. However, risk premiums could bounce back quickly should Middle East exports suffer new disruptions.

This means that although current market worries over supply outages have eased, the short-term trajectory of crude oil prices will still be tied to developments in the Middle East, especially amid lingering uncertainties over key shipping lanes and export facilities.