Oil Prices Pull Back After Recent Rally

Oil prices declined on Monday as investors booked profits following a rally that pushed both major crude benchmarks to multi-month highs. Despite the pullback, market attention remained focused on whether conflicts in the Middle East and Ukraine would further disrupt the global oil supply-demand balance.

Brent crude futures fell $1.34, or 1.22%, to $108.52 a barrel by 1002 GMT. The benchmark had settled at its highest level since May 19 on Friday.

US West Texas Intermediate crude was trading at $101.28 a barrel, down 13 cents, or 0.13%, after closing the previous week at its highest level since September 17.

The modest decline in WTI contrasted with the sharper move in Brent, but both benchmarks remained sensitive to developments affecting physical crude supplies.

Strait of Hormuz Remains a Critical Supply Risk

Continued attacks on vessels crossing the Strait of Hormuz have supported oil prices by restricting flows through a key export route. UBS analyst Giovanni Staunovo said the ongoing incidents and oil movements remaining below pre-conflict levels continued to provide support for the market.

Iran’s Islamic Revolutionary Guard Corps said, according to Iranian media, that an oil tanker caught fire and exploded after striking a naval mine in the southern part of the strait on Sunday.

Analytics firm Kpler reported that increased attacks on commercial shipping had reduced Gulf crude flows to a seven-day average of approximately 8.5 million barrels per day last week, compared with more than 20 million barrels per day the previous week. Kpler also reported at least 10 confirmed incidents involving commercial vessels during the week.

The figures illustrate the potential scale of the disruption. Even if crude prices retreat temporarily, sustained restrictions on shipping could continue to tighten available supplies and reinforce the market’s geopolitical risk premium.

Further Escalation Could Threaten Export Recovery

The sustainability of recent increases in oil exports through Hormuz remains uncertain. SEB analyst Bjarne Schieldrop said Iran could intensify attacks ahead of the November 3 US midterm elections, potentially putting renewed pressure on shipments.

Regional tensions also widened after Egypt said it was prepared to provide Saudi Arabia with the support needed to defend its security and stability against Yemen’s Iran-aligned Houthis.

Any expansion of the conflict could increase uncertainty around shipping routes, export volumes and the reliability of regional energy supplies. For oil markets, the key variable remains the extent to which these developments affect actual deliveries rather than geopolitical tensions alone.

US Policy on Russian Exports Adds Another Supply Variable

Developments in US policy toward Russian energy exports introduced an additional factor for oil traders. President Donald Trump signed an executive order on Friday waiving certain sanctions and tariffs related to Russian exports.

The waiver followed an agreement with Russian President Vladimir Putin to export diesel to the United States and other countries. The reported volumes are expected to begin at approximately 2.3 million barrels this month before increasing to around 7.6 million barrels per month.

US Secretary of State Marco Rubio said the president would take up to 60 days to assess the effects of sanctions and tariffs on the global economy.

Phillip Nova head of market insight Priyanka Sachdeva characterized the move as an attempt to contain oil prices ahead of the US midterm elections. She argued that the policy did little to resolve physical supply disruptions in the Strait of Hormuz while tanker attacks continued.

The potential additional diesel supply could influence regional fuel balances, but its overall effect will depend on implementation and whether broader crude transportation disruptions persist.

What Investors Should Watch Next

Oil markets are likely to remain sensitive to shipping incidents in the Strait of Hormuz, changes in Gulf export volumes and any escalation involving regional powers. The sustainability of Russian diesel exports and the effects of US sanctions policy will also be important considerations.

The distinction between benchmark price movements and physical supply conditions remains critical. Profit-taking can temporarily lower crude prices, but persistent restrictions on exports could continue to support prices if available supplies remain constrained.

For investors and energy-market participants, the next indicators to monitor include confirmed vessel incidents, daily and weekly export flows, and developments affecting the security of major shipping routes. The balance between easing financial-market positioning and continuing physical supply risks will help determine whether the recent rally resumes or gives way to a more sustained correction.