Oil prices slipped in early Asian trading on Tuesday after Saudi, Turkish and Pakistani officials opened talks with Iran's leadership. The dip was small, and Brent stayed close to its highest level since spring after a week of Houthi attacks on Saudi Arabia's energy infrastructure.

Brent crude fell 66 cents to $115.15 a barrel by 8 a.m. HKT, while U.S. West Texas Intermediate lost 44 cents to $101.32, Reuters reported. Brent had climbed above $117 last week, its highest since April, and touched that level again on Monday.

For Asian refiners, airlines and governments that cap fuel prices, the pullback offers little relief. Brent is up about 80% from a year earlier, according to Trading Economics data. In a Friday note, ING analysts argued that prices would carry a large geopolitical premium even without a fresh flare-up, simply because one remains possible, Reuters reported.

Houthi strikes and Tehran talks

The latest leg of the rally came from Yemen as well as from Iranian attacks on tankers. Iran-aligned Houthi forces launched a series of attacks across Saudi Arabia, including on energy facilities, and Saudi Aramco ordered staff to evacuate its Dhahran headquarters on Oct. 22, Reuters reported.

Brent jumped 4% that day to settle at $113.17, its highest close since early May, according to The Nation. On Friday it reached $117.45 intraday, the highest in nearly six months, putting it on course for a weekly gain of about 6%, Reuters reported.

Shipping in the Gulf has also deteriorated. A Washington-based think tank that has tracked maritime security since 2017 said October has been the worst month for attacks on commercial vessels in and around the Strait of Hormuz, Reuters reported.

“The market is concerned about these continued Iranian attacks on tankers,” Andrew Lipow, president of Lipow Oil Associates, told Reuters.

ING analysts Warren Patterson and Ewa Manthey warned of renewed escalation in the Persian Gulf, citing reports that Washington was weighing fresh strikes on Iran, Oilprice.com reported. The bank now considers its earlier fourth-quarter Brent forecast of $80 a barrel unattainable.

Saudi Defense Minister Prince Khalid bin Salman traveled to Tehran on Monday and met Iranian President Masoud Pezeshkian, with Pakistan's army chief Asim Munir and Turkish intelligence chief Ibrahim Kalin also taking part, Trading Economics reported.

Saudi Arabia said the visit was meant to open negotiating channels and “prevent the return of military escalation,” according to Reuters. Iranian state media said the four countries agreed to keep talking about peace and security cooperation.

Hopes for near-term calm remain fragile. The Houthis have renewed attacks on Saudi Arabia, and President Donald Trump said on Friday that the U.S. could end the war with Iran quickly but suggested it might be better to let the conflict wind down gradually, Reuters reported.

Flows are recovering faster than prices

Physical supply has improved more than the price suggests. Morgan Stanley estimated Middle Eastern crude exports at about 17 million barrels a day in mid-October, compared with a pre-war 12-month average of about 18 million barrels a day calculated by Kpler, The Nation reported.

The International Energy Agency's October oil market report showed Gulf crude exports rose by about 4.4 million barrels a day in September to roughly 75% of pre-war levels, while Iran's exports fell to zero under a U.S. blockade, investingLive reported. The agency expects world oil demand to shrink by about 2.6 million barrels a day this year.

Other disruptions have added to the strain. Libya's National Oil Corp. said a closed pipeline valve cut output at the Hamada and Tahara fields, and the U.S. authorized the release of up to 400,000 barrels from its Strategic Petroleum Reserve to address a Louisiana refinery outage, according to Reuters and Trading Economics.

What it means for Asia

Asian governments are feeling the fiscal cost. Japan may begin trimming its gasoline subsidies in December because the payments, which began in March and cost several billion dollars a month, are becoming hard to sustain, according to a Reuters report cited by Oilprice.com. The program is funded from an extra budget worth about $19 billion that was approved in May.

Investors will watch whether the Tehran talks produce a formal channel before the U.S. midterm elections next month, the pace of Houthi attacks on Saudi facilities, and weekly tanker counts through Hormuz. Diesel is a further variable: Russian refiners are raising output this month after Moscow granted export quotas following a supply agreement with Washington, Reuters reported, citing two industry sources.