Oil ticks lower as Saudi defense minister meets with Iran's president in Tehran to de-escalate

Key points

• Brent crude fell 20 cents to $116.52 a barrel and U.S. West Texas Intermediate dropped 79 cents to $102.48 as Saudi Arabia's defense minister met Iranian leaders in Tehran.
• Saudi Defense Minister Prince Khalid bin Salman met Iranian President Masoud Pezeshkian and Supreme National Security Council Secretary Mohsen Rezaei on Monday.
• The Houthis said they fired missiles at Riyadh's international airport and launched drones at oil pumping stations, though Saudi Arabia has not confirmed the strikes.

Crude oil prices edged lower on Monday as Saudi Arabia's defense minister held talks with Iranian leaders in Tehran aimed at easing tensions between the two countries. Brent crude futures were down 20 cents at $116.52 per barrel after briefly rising above $117 earlier in the session, while U.S. West Texas Intermediate fell 79 cents to $102.48. Prices have gained about 12% this month.

Saudi Defense Minister Prince Khalid bin Salman met Monday with Iranian President Masoud Pezeshkian and Supreme National Security Council Secretary Mohsen Rezaei. Pakistan's Army Chief of Staff Asim Munir and the head of Turkish intelligence Ibrahim Kalin also took part; Pakistan and Turkey are members of a defense pact with Saudi Arabia.

Attacks and market fears

The Tehran meeting came as Iran-allied Houthi militants in Yemen have repeatedly attacked Saudi Arabia in recent weeks. The Houthis said Monday they fired missiles at Saudi Arabia's international airport in Riyadh and launched drones at oil pumping stations; the Saudis have not confirmed those strikes took place.

Investors are worried about the vulnerability of Saudi Arabia's energy infrastructure and the risk of another major disruption to production, refining or export facilities. Global inventory levels have fallen sharply after eight months of conflict, and the U.S. Strategic Petroleum Reserve is at its lowest level since 1982.

We're not really seeing major capex additions to bring new rigs on or bring new production online

— Michael Alfaro

Refining risk and supply moves

Michael Alfaro, chief investment officer at Gallo Partners, said geopolitical uncertainty has already added roughly $20 a barrel to oil prices. He said a substantial strike on Saudi Arabia's East-West pipeline or additional refining infrastructure could send prices sharply higher, though prices above $120 would also destroy demand. He warned that damage to refining could become a longer-term structural problem extending into 2027 and beyond.

Saudi Arabia plans to begin storing crude oil in Singapore from the second half of 2027, according to energy ministers from both countries, to strengthen its Asian supply chain. The U.S. Energy Department on Friday authorized the release of up to 400,000 barrels from the Strategic Petroleum Reserve to address a supply disruption at a Louisiana refinery. Alfaro said U.S. producers were adding some rigs but remained cautious about major capital spending.