Oil heads for strong weekly gain as supply risks rise

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Oil heads for strong weekly gain

Highlights

Brent is up 7.63% over the past week.
WTI has gained 8.54% over the same period.
Hormuz vessel traffic remains sharply reduced.
U.S. diesel prices have reached record highs.

Brent crude was trading at $94.84 a barrel, down 0.71% on the day, while West Texas Intermediate stood at $90.51, down 0.87%, according to the latest market data. Despite Friday’s decline, Brent remained 7.63% higher over the past week, and WTI was up 8.54%, extending gains driven by renewed hostilities and restricted shipping flows. Reuters reported that the latest U.S. attacks produced some of the fiercest clashes between Washington and Tehran since July.

Hormuz disruption keeps supply risk elevated

Shipping activity through the Strait of Hormuz remains well below recent norms. Preliminary data showed four commodity vessels transited the waterway on Thursday, compared with a 10-day average of roughly 15.

The U.S. government has indicated that Middle Eastern oil flows have moved closer to normal levels, but tanker tracking and industry analysis continue to point to significant disruption. The gap has kept traders focused on whether the conflict could further restrict crude and refined-product supplies.

Iraq has provided some additional supply. Its oil exports increased to about 2.34 million barrels a day in August from roughly 1.35 million barrels a day in July.

Fuel costs intensify inflation pressure

The impact is spreading beyond crude markets. Record U.S. diesel prices are raising transportation and industrial costs because the fuel is widely used in trucking, agriculture, manufacturing, and construction.

Renewed U.S.-Iran hostilities are not the only source of pressure. Ukrainian attacks on Russian refineries have added another supply risk to global fuel markets.

Higher energy costs are also complicating the outlook for interest rates. Persistent fuel inflation can feed into broader consumer prices and keep government bond yields elevated as investors reassess how quickly central banks can ease monetary policy.

Forecasts are moving higher as disruption persists. Citi increased its third-quarter average Brent forecast to $86 a barrel from $80, while ANZ raised its short-term Brent forecast to $95.

Energy shock reaches the wider economy

The weekly surge in oil matters because the effects extend far beyond energy producers. Brent above $94 and WTI above $90 increase costs throughout global transport and manufacturing networks, while record diesel prices add another direct inflation channel.

With shipping through one of the world’s most important maritime energy corridors still constrained, markets remain sensitive to any further escalation between the U.S. and Iran. The combination of expensive crude, record diesel costs, and higher borrowing rates raises the risk that the energy shock will increasingly weigh on global economic growth.

Earlier, we reported that the EU backs U.S. sanctions on Iran as Hormuz tensions persist.

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