Oil Prices Set for Over 11% Weekly Gain as U.S.-Iran Conflict Intensifies

Oil prices are poised for a weekly gain of more than 11% as escalating military hostilities between the United States and Iran stoke fears of significant supply disruptions from the Middle East. The conflict has added a substantial geopolitical risk premium to crude markets, pushing benchmark prices to multi-week highs.

As of early Friday trading in Asia, Brent crude futures for September delivery rose to $84.88 per barrel, while West Texas Intermediate (WTI) crude futures traded at $79.62 per barrel. Both contracts are on course for their largest weekly percentage gain in months.

Geopolitical Tensions Fuel Risk Premium

The primary driver for the rally is the heightened conflict in the Persian Gulf. The U.S. military reported conducting its sixth consecutive night of strikes on Iran on Thursday, aimed at degrading Tehran's military capabilities. These actions have intensified concerns over the security of the Strait of Hormuz, a vital chokepoint through which approximately one-fifth of the world's oil supply passes.

In response to the strikes and a U.S. naval blockade, Iran has repeatedly issued threats concerning shipping through the strait. According to the source, vessel traffic in the strategic waterway has already slowed, tightening the outlook for global supply.

U.S. Inventories Point to Tighter Market

Ad

Adding to the upward price pressure, recent data from the U.S. indicated a tightening physical market. The Energy Information Administration (EIA) reported on Wednesday that domestic crude oil stockpiles fell by 1.7 million barrels in the week ended July 10, a larger draw than analysts had anticipated.

Gasoline inventories also saw a notable decline, falling by 1.5 million barrels. These figures suggest robust demand and provided fundamental support for the price rally, which was initially sparked by geopolitical events earlier in the week.

Market Outlook

While prices surged by as much as 10% on Monday, the rally has since moderated as traders weigh the likelihood of a prolonged conflict against the possibility that other major producers could increase output to offset any shortfall. Investors remain focused on diplomatic developments, with reports suggesting regional mediators are continuing to pursue de-escalation talks.