Oil Heads for Weekly Gain as US Threatens Indefinite Iran Blockade

Oil prices rose on Friday and are set for a significant weekly gain after the United States threatened to impose an indefinite naval blockade on Iran, fueling concerns over major disruptions to crude supplies from the Middle East.

As of 1047 GMT, Brent crude futures traded up 0.14% at $87.19 a barrel, while U.S. West Texas Intermediate (WTI) crude was up 0.62% at $81.75 a barrel. According to Reuters data, Brent and WTI were on track for weekly gains of approximately 4.3% and 4.6%, respectively.

US Escalates Pressure on Tehran

The price rally follows a U.S. announcement on Thursday that it could maintain a naval blockade indefinitely and intensify economic pressure as ceasefire talks with Iran have stalled. The move signals a hardened stance with significant implications for energy markets.

"Watch this space for more announcements coming next week because we are going to apply measures like have never been seen in the history of economic isolation of a country," Treasury Secretary Scott Bessent said in an interview with Newsmax. Analysts see little prospect for a near-term resolution, with Bjarne Schieldrop at SEB Research noting that, "A return to normal flows out of the Strait of Hormuz is now suddenly without any near-term hopes."

Strait of Hormuz in Focus

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The threat directly impacts the Strait of Hormuz, a vital chokepoint that handled about a fifth of global daily oil and liquefied natural gas supplies before the conflict began in late February. Shipping traffic through the channel has already fallen below the month's average, according to reports.

Heightening regional risk, the UAE's state news agency WAM reported that two vessels owned by the Abu Dhabi National Oil Company were attacked while transiting the strait on Thursday. The UAE government condemned the incident as an Iranian attack.

Contrasting Market Fundamentals

While the geopolitical risk premium is pushing prices higher, some market fundamentals present a more bearish outlook. Recent forecasts from OPEC pointed to weaker demand growth, while U.S. crude inventories just posted their largest weekly increase in over three and a half years.

"This week’s reports by the IEA and EIA were quite revealing. Storage is holding up much better than feared, which should pull oil prices lower," said Norbert Rucker, head of economics at Julius Baer, suggesting that ample supply could help cap gains.