International and U.S. crude oil futures saw an increase on Friday following U.S. President Donald Trump's threats of economic sanctions against Iran's trading partners, fueling expectations of tighter supply. Brent crude futures settled at $94.39 a barrel, marking a 61-cent or 0.65% rise, while U.S. West Texas Intermediate (WTI) crude settled at $87.06 a barrel, up 23 cents or 0.26%. Both benchmarks reached their highest levels since July 24 earlier in the week, with Brent gaining 6.39% and WTI rising 5.66% over the week.
Analysts attributed the price hikes to the looming sanctions and their potential impact on Iranian oil exports. John Kilduff, partner with Again Capital, noted that "sanctions have been the only thing to bring Iran to heel." Crispus Nyaga, research analyst at Empire FX, suggested that while the immediate supply impact might be limited due to existing U.S. naval blockades, increased shipping incidents and retaliation could worsen the situation, especially with traffic through the Strait of Hormuz remaining below normal levels. The U.S. naval blockade has already significantly curtailed Iranian crude shipments, leading to a decline in offers to Chinese buyers and a jump in prices.
Despite the challenges in the Strait of Hormuz, which traditionally handles about a fifth of global oil supplies, Phil Flynn, senior analyst with Price Futures Group, noted that alternative supplies and workarounds are being found. He mentioned pipelines, shuttles, U.S. shale production, a recovering Venezuela, and an unconstrained UAE as factors adding barrels to the market. However, concerns persist over continued supply curtailments from major producers such as Saudi Arabia, Iraq, the United Arab Emirates, and Kuwait. The expiration of the peace deal between the U.S. and Iran this week, without any effort to restart talks, further exacerbated market tensions.
Data from ship-tracker Kpler indicated only seven commodity ships sailed through the Strait of Hormuz on Thursday, half the previous day's tally, highlighting ongoing disruptions. Prior to the U.S.-Israeli attacks on Iran in late February, the Strait of Hormuz was a critical chokepoint for global oil and liquefied natural gas. The six-month conflict has maintained disruptions to energy flows through this vital waterway, contributing to an overall sentiment of impending supply tightness in the crude oil market.
