Oil prices experienced a significant decline of over 2% on Monday as traders balanced the ongoing risk of attacks on Saudi Arabian energy infrastructure with worries that persistently high prices could eventually dampen demand. U.S. West Texas Intermediate (WTI) crude fell 2.19% to $101 per barrel, while Brent crude dropped 1.89% to $114.51 a barrel. This pullback came after a sharp spike on Friday, fueled by renewed fears of supply disruptions following assaults by Yemen’s Houthi militants targeting vital Saudi facilities.

The attacks, which included strikes on Riyadh’s main airport and key oil infrastructure, have kept tensions high throughout the weekend. Saudi officials reported intercepting additional missiles and drones on Sunday as the kingdom partially resumed airport operations despite some damage. These events have heightened fears over the vulnerability of Saudi Arabia's energy supply chain, making traders increasingly wary of the potential for a substantial interruption to crude production or refining capacity that could drive prices even higher.

Michael Alfaro, chief investment officer at Gallo Partners, estimated that geopolitical uncertainties have already added roughly $20 a barrel to oil prices. Alfaro warned that while a major hit to Saudi infrastructure could cause sharp price spikes, sustained gains above $120 to $140 a barrel may trigger demand destruction, curbing consumption. He also stressed that disruptions to refining capacity could pose longer-term challenges extending into 2027, potentially constraining fuel availability on a global scale.

In response to the ongoing threat, Saudi Arabia plans to bolster its crude storage capabilities in Singapore by the second half of 2027 to enhance supply resilience in Asia. Meanwhile, the U.S. Energy Department authorized the release of up to 400,000 barrels from the Strategic Petroleum Reserve to mitigate a supply issue at a Louisiana refinery. However, U.S. producers remain cautious about boosting capital expenditures or significantly increasing production amid volatile prices and geopolitical tensions, contributing to uncertainties about future supply levels.