Oil Prices Stabilize as U.S. Threat of Iran Blockade Counters Demand Worries

Oil prices recovered modestly in early trading after the United States threatened to maintain its naval blockade of Iran indefinitely, reviving concerns over a prolonged disruption to global crude supplies. The slight gains follow a sharp drop in the previous session, where a weakening demand outlook weighed on the market.

Geopolitical Tensions Support Prices

The primary driver for the uptick was a statement from Washington on Thursday indicating it could extend its naval blockade and intensify economic pressure on Tehran amid stalled ceasefire negotiations. U.S. Treasury Secretary Scott Bessent, in an interview with Newsmax, said the administration would "apply measures like have never been seen in the history of economic isolation on a country."

These threats escalate tensions around the Strait of Hormuz, a critical chokepoint that carried 20% of the world's oil before the conflict. Iran's head of the Basj paramilitary unit, Hossein Taeb, asserted that the strait is "under the management and control of the Islamic Republic," according to the semi-official Fars news agency. Adding to the instability, the UAE's state news agency WAM reported that two vessels from the Abu Dhabi National Oil Company were attacked in the strait Thursday evening.

Bearish Fundamentals Cap Gains

Countering the supply-side risks are growing concerns about global oil consumption. Both benchmarks fell more than 2% in the prior session after OPEC and the International Energy Agency (IEA) lowered their forecasts for demand growth. This bearish sentiment was compounded by data showing U.S. crude stockpiles recorded their largest weekly increase in over three and a half years.

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"The result is a market that remains supported but struggles to break meaningfully higher while these opposing pressures remain in place," said Tim Waterer, chief market analyst at KCM, in a note.

Key Price Movements

As of 0130 GMT, oil benchmarks showed modest gains:

• Brent crude futures rose 9 cents, or 0.1%, to $87.16 a barrel.
• U.S. West Texas Intermediate (WTI) crude futures were up 4 cents at $81.29 a barrel.

Despite the previous session's decline, both Brent and WTI were on track to post weekly gains of approximately 4%.