Citi Futures Perspective's energy analyst Tim Evans agrees that while there's a "perpetual need to find something scary to use as a justification for a long position in crude oil, I don't see a Saudi-Iranian showdown as a high-probability bullish scenario." "In fact, under a scenario where Saudi Arabia looks to punish Iran economically, they would maintain production at a high level to knock down prices, depriving Iran of income." MF Global senior markets strategist Richard Ilczyszyn, on the other hand, is in the camp that believes the tensions between the two regions are leading to increased risk premium for oil prices -- and as tensions continue to escalate, the markets will see "shorts running for the hills. We can see risk premium added to the market as we speak," he said, pointing to the U.S. Commodity Futures Trading Commission's report that hedge funds increased net-long positions in energy and grains by 12% last week. Natixis' Deshpande says "the tensions between the three nations -- U.S., Iran and Saudi Arabia that escalated further recently due to the alleged assassination plot is not likely to have any immediate impact on oil prices. However if the United Nations atomic agency's intelligence data report that is expected to be published in November confirms Iran's active nuclear program for military purpose, more sanctions on Iran by the U.S. and UN are possible. This could lead to further reduction in oil production as more oil companies would be prompted to leave the country, thereby reducing supply from Iran." "This could push oil prices up," said Deshpande. "Oil production in Iran has fallen down since 2009, dropping by 1.4% and 2.5% year-over-year in 2009 and 2010, respectively." Matt Smith, commodity analyst at Summit Energy, a subsidiary of Schneider Electric, takes a more cautious stance on the Saudi Arabia's powerful position in oil, saying that "they have a huge responsibility -- one that seemingly outweighs the current tension with Iran." Despite the mixed views on Saudi Arabia-Iran's impact on oil prices, one thing everyone can agree on is that, as TAC Energy trader Mark Anderle emphasizes, Greece, Italy and the eurozone debt crisis will continue to be a dominant force in shaping oil price direction for some time. "It seems pretty telling in how oil prices have become a financial vehicle over the past few years in that Greece and Italy are influencing oil prices more than Saudi Arabia and Iran," said Anderle. Energy stocks were mostly falling. EOG Resources ( EOG) was tumbling 2.1% to $89.18; Apache ( APA) was tumbling 2.1% to $95.23; Anadarko Petroleum ( APC) was down 0.5% to $78.80; Chesapeake ( CHK) was losing 1.5% to $27.91; Kinder Morgan Energy ( KMP) was flat at $77.10; Suncor Energy ( SU) was falling 1.4% to $30.99; and Triangle Petroleum ( TPLM) was rising 0.7% to $5.45. -- Written by Andrea Tse in New York. >To contact the writer of this article, click here: Andrea Tse.