Oil prices are experiencing their steepest weekly gain since July, fueled by intensifying U.S.-Iran hostilities and concerns about prolonged disruptions to energy flows through the Strait of Hormuz. Brent crude futures rose 7.1% for the week, trading around $96 a barrel, while U.S. West Texas Intermediate (WTI) crude futures climbed 9.8%, nearing $92. These increases follow a period of relative calm, with recent U.S. bombing campaigns and Iranian retaliation against American bases marking the fiercest clashes between the two nations since July, seven months into a conflict that began with U.S.-Israeli strikes.
Despite the hostilities, some crude shipments continue to exit the Gulf through Hormuz, and U.S. officials noted robust regional flows. However, four commodity vessels transited the Strait on Thursday, down from nine a day earlier and significantly below the 10-day average of about 15. The war has significantly impacted global energy markets; Brent crude is up almost 60% this year, and refined products like diesel have seen even steeper gains. U.S. retail diesel prices hit their highest since mid-2022 this week, and European stockpiles are well below seasonal levels. Citi raised its third-quarter Brent forecast to $86 a barrel from $80, while ANZ analysts increased their short-term Brent forecast to $95 a barrel.
Key statements from officials reflect the volatile situation. Israeli Defence Minister Israel Katz warned that Israel would "cripple" Iran's military and energy infrastructure. U.S. Vice President JD Vance stated that Washington would not hold talks with Tehran unless it ceased attacking commercial shipping in the Strait of Hormuz. Conversely, Russian President Vladimir Putin suggested a path to peace in the Ukraine war, indicating potential support from the U.S. and China. Iraq's oil exports increased to approximately 2.34 million barrels per day in August, up from about 1.35 million bpd in July, with September exports also expected to rise due to discounts and Iranian approvals for Iraqi tankers. Iran has expanded its list of vessels deemed non-compliant, subject to fines or confiscation if they attempt to transit the Strait of Hormuz.
