International oil prices fell for a second consecutive trading day on October 27, mainly because Saudi Arabia, Turkey, Pakistan and Qatar stepped up diplomatic engagement with Iran, easing market fears that the Middle East military conflict could widen further. As of 13:25, December Brent crude futures were down 1% at US$114.66 a barrel, while US WTI crude futures were down 1.1% at US$100.69 a barrel. Earlier, the risk of attacks on Middle East energy facilities and commercial ships had pushed Brent crude to a six-month high. Although diplomatic mediation has driven oil prices lower, disruptions to shipping through the Strait of Hormuz, continued Houthi attacks on Saudi facilities, and differences between the United States and Iran in negotiations still leave energy supply facing considerable uncertainty.
Officials from Three Countries Visit Tehran for Talks, Diplomatic Engagement Eases Market Worries
According to reports, senior officials from Saudi Arabia, Turkey and Pakistan held talks with Iranian leaders in Tehran on October 26, seeking to ease regional tensions and establish communication channels for follow-up negotiations. Qatari officials have also recently maintained contact with Iran in an effort to prevent the conflict between the United States, Israel and Iran from expanding further. The consultations covered several issues that directly affect energy markets, including Houthi attacks targeting Saudi Arabia, the possibility of resuming US-Iran talks, disruptions to shipping through the Strait of Hormuz, and the US blockade of Iranian ports. Diplomatic activity by multiple countries has eased market concerns about a larger military conflict breaking out in the short term, pushing international oil prices down from last week's highs. However, US President Trump still retains the possibility of taking further military action against Iran, while Iran demands that the United States make concessions before resuming negotiations, including ending the port blockade and lifting sanctions on Iranian oil exports. The two sides have not yet reached agreement on the relevant conditions, so whether diplomatic engagement can translate into sustained de-escalation still depends on the progress of subsequent negotiations.
Houthis Claim Attack on Saudi Oil Pipeline, Energy Transport Risks Remain
Despite progress in diplomatic mediation, Middle East energy facilities and shipping security still face threats. Yemen's Houthi movement claimed on October 26 that it had attacked a pump station along Saudi Arabia's east-west crude pipeline and Riyadh airport, but Saudi Arabia has not immediately confirmed the attacks. Previously, Saudi Arabia had reported intercepting missiles and drones for several consecutive days. Saudi Arabia's east-west pipeline connects the eastern oil-producing region with export facilities on the Red Sea coast, making it an important route for Saudi Arabia to move crude to Red Sea exports when shipping through the Strait of Hormuz is disrupted. Therefore, if pump stations along the route are damaged, it could further limit Saudi Arabia's ability to export crude while bypassing the Strait of Hormuz. At the same time, commercial shipping through the Strait of Hormuz and the Bab el-Mandeb Strait is still affected by the conflict. These two routes respectively connect the Persian Gulf with the open sea and the Red Sea with the Gulf of Aden, and are important transport channels for global energy trade. Persistent military risks may increase tanker transport, insurance and supply chain costs.
IEA Expects Energy Market Will Struggle to Return to Pre-War Level by 2027, Saudi Arabia Expands Asian Oil Storage Layout
The long-term impact of the Middle East conflict on energy supply chains is also drawing attention. Fatih Birol, executive director of the International Energy Agency, said on October 26 that even by 2027, the global energy market will struggle to return to the state before the Iran war broke out, reflecting the continued shock the war has caused to crude and refined product supply systems. At the same time, Saudi Aramco is taking measures to improve energy supply security in Asian markets. Saudi Arabia and Singapore announced on October 26 that they plan to begin storing Saudi crude in Singapore's Jurong Rock Caverns oil storage facility from the second half of 2027, in order to strengthen the resilience of the crude supply chain in Southeast Asia. This arrangement will help Saudi Arabia deploy part of its crude inventory closer to Asian consumer markets and improve its ability to adjust supply if Middle East transport routes are interrupted. At present, international oil prices have fallen for two consecutive days, mainly reflecting the market's positive response to diplomatic mediation. However, with shipping through the Strait of Hormuz not yet back to normal and Saudi energy facilities continuing to face the risk of attack, geopolitical factors may still cause relatively large fluctuations in oil prices.
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