Brent and WTI head for their strongest weekly performance since mid-July as renewed fighting raises concerns over Middle East oil supplies and Strait of Hormuz shipping.
SINGAPORE — Web Desk: Oil prices are heading for their strongest weekly gain since mid-July as renewed fighting between the United States and Iran increases concerns about disruptions to crude supplies from the Middle East.
Brent crude futures rose to around $95.67 a barrel, while US West Texas Intermediate (WTI) crude reached about $91.56 a barrel in early trading on Friday. On a weekly basis, Brent was up about 7.1% and WTI about 9.8%, according to Reuters.
The gains reflect growing investor concern that further military escalation could disrupt energy flows through the region.
US-Iran Fighting Drives Supply Concerns
The latest rise follows renewed US-Iran military exchanges this week.
Reuters reported that the latest clashes have been the fiercest between the two countries since July, increasing uncertainty over energy infrastructure and oil transportation routes.
Israel has also issued renewed warnings about targeting Iranian military and civilian infrastructure, including energy facilities, adding another layer of risk for oil markets.
For traders, the central concern is not simply the volume of oil currently available but whether future supplies can move safely through key regional shipping routes.
Strait of Hormuz Remains a Major Risk
The Strait of Hormuz remains at the centre of the market’s concerns.
Before the conflict, the waterway handled roughly one-fifth of global oil and liquefied natural gas supplies, making it one of the world’s most important energy chokepoints.
Shipping activity through the strait has remained significantly below normal levels. Kpler data cited by Reuters showed only four commodity vessels crossed the waterway on Thursday, compared with a 10-day average of about 15.
The figures exclude vessels operating with their automatic identification systems switched off, meaning actual traffic could be higher.
Nevertheless, the decline has reinforced concerns about the ability of oil and other commodities to move through the region.
Brent and WTI Post Strong Weekly Gains
Brent, the international oil benchmark, has risen sharply during the week as traders reassessed geopolitical risks.
WTI, the US benchmark, has recorded an even larger percentage gain.
Reuters reported that Brent was on track for its biggest weekly increase since the week ending July 20, while WTI was also heading for its strongest weekly performance over the same period.
Prices had already jumped earlier in the week after renewed US strikes against Iran pushed Brent to its highest close since late July.
The continuing gains show that traders remain focused on the possibility of prolonged supply disruptions rather than treating the latest military escalation as a short-lived event.
Analysts Raise Price Forecasts
Some analysts have become more bullish on crude prices as uncertainty surrounding the Strait of Hormuz has increased.
Citi raised its average Brent forecast for the third quarter to $86 a barrel from $80, saying the reopening of the strait was taking longer than previously expected.
ANZ also raised its short-term Brent forecast to $95 a barrel, while warning that prices could move higher if the conflict intensifies.
The forecasts demonstrate how quickly geopolitical developments can alter expectations in energy markets.
Higher Oil Prices Could Increase Inflation
The impact extends beyond the energy sector.
Higher crude prices can increase transportation, manufacturing and logistics costs, while rising fuel prices can feed into broader consumer inflation.
The pressure is particularly visible in diesel markets. Reuters reported that average US diesel prices have reached record levels as renewed US-Iran hostilities and Ukrainian attacks on Russian refineries have added to supply concerns.
Economists have warned that sustained increases in energy costs could make it more difficult for central banks to contain inflation.
Global Economy Faces New Energy Risk
The latest oil rally comes at a sensitive time for the global economy.
If crude prices remain elevated for an extended period, oil-importing countries could face larger energy bills, while businesses could experience higher operating and transportation costs.
Higher inflation expectations can also put pressure on government borrowing costs and complicate monetary-policy decisions.
Rystad Energy chief economist Claudio Galimberti said diesel affects virtually every sector of the economy, highlighting the broader consequences of higher energy costs.
Iraq Increases Oil Exports
Some additional supply has entered the market from Iraq.
Iraq increased its oil exports in August to about 2.34 million barrels per day, compared with approximately 1.35 million barrels per day in July, according to Iraqi energy officials cited by Reuters.
The increase could provide some relief to global markets, although analysts remain focused on the much larger geopolitical risks surrounding Gulf shipping routes.
