The laughter is a little unexpected, but while it could arrive as cruel or mocking, the greater effect it has for Oswald is surprise. It makes him blink, momentarily caught in a kind of mild loop of not being sure what to do before Ed speaks--explains, really.

"A breakdown..."

The way Ed skips immediately from basically saying he's been self-medicating to deal with extreme mental disturbance to asking Oswald if he wants to vet his food is another one of those whiplash moments. In an instant, he can see several different versions of himself around the table, each responding to Ed differently. There's a cruel, vindictive version of Oswald, barking a harsh laugh and telling Ed it serves him right and doesn't it suck when it feels like you're seeing things. Another version of him feels a kind of deep-seated distress, both for Ed as a person and for the awareness that what he's talking about sounds very much like a response to the environment they're in now.

But the way Ed sort of hops from sharing those details to picking up on Oswald's paranoia with ease brings him back into the moment. It's just... very Ed, isn't it? To the point, matter-of-fact and non-judgemental. He understands. Even here, even now.

Oswald swallows, then shakes his head as he lifts a hand.

"That won't be necessary."

It's enough to convince him to take up the knife and fork and start to dig in.