However, the Hamas attack on Israel on October 7 and the subsequent retaliation against Gaza disrupted the geopolitical balance in the oil-rich Middle East.

Crown Prince Mohammed bin Salman of Saudi Arabia is now a key player in the unfolding Middle East conflict. Concurrently, normalization of relations between Middle Eastern nations, including major oil producer UAE and Israel, was underway, with a U.S.-brokered Saudi-Israel normalization on the horizon.

There were prospects of Saudi Arabia increasing its oil production early next year if oil prices soared, in a bid to gain U.S. Congress's goodwill. This production increase was intertwined with discussions of Saudi recognizing Israel in exchange for a U.S. defense deal. However, recent conflicts have paused these talks, causing uncertainty in the global oil market.

With the possibility of stricter U.S. sanctions on Iranian oil exports, there's concern of a tighter oil supply. After renewing ties with Iran, Saudi Arabia has leaned towards the Palestinian cause in this conflict, a sentiment echoed by other major Middle Eastern oil producers.

In the aftermath of the Gaza hospital explosion, Saudi Arabia hosted an emergency meeting of the Organization of Islamic Cooperation, which placed blame on Israel.

The Oil Equation Amid Geopolitical Strain

U.S.-Saudi relations under President Joe Biden have been tense, particularly with Saudi and OPEC+ production cuts pushing up oil prices. Saudi oil company Aramco has a spare capacity of 3 million bpd, and its CEO stated that they could increase production quickly if needed.

Despite Iran's recent call for an oil embargo on Israel due to the Gaza conflict, neither the Saudis nor the OPEC+ alliance have signaled a change in their oil supply strategy. Given the ongoing Middle East unrest, oil prices might surge further, and the U.S. may find it challenging to count on Saudi Arabia for price stabilization.