Last weekend, Saudi Arabian oil facilities were attacked by missiles and drones, leading to extensive damage. The facilities control the flow of over half of Saudi Arabia’s oil and represent approximately 5% of global production.
The attacks have been widely attributed to Iran, leading to initial concerns about a much wider military conflict, especially after President Trump stated that the U.S. military was “locked and loaded.”
Further attacks on Saudi Arabia or retaliatory strikes against Iran could severely restrict oil production in either country or even limit exports from the Middle East at large, as Iran controls the waterways that much of the world’s oil tankers pass through.
On Sunday night, when global oil traders got their first chance to react, the global benchmark November Brent crude oil rallied more than $10, pushing as high as $71 per barrel.
Since then, tensions have calmed significantly; there have been no further attacks, and it appears that neither the United States nor Saudi Arabia are preparing military counterstrikes. Furthermore, the Saudis are expecting to get facilities working again sooner than feared.
As a result, oil prices have faded significantly, giving up half of their initial rally, with November Brent trading for $65 per barrel on Friday.