Oil Prices Top $100 for First Time in Four Months Amid Widening Mideast Conflict

Oil prices climbed on Friday, with both major benchmarks poised to end the week above the $100 a barrel threshold for the first time in nearly four months. The surge is being fueled by mounting investor concerns over prolonged supply disruptions as geopolitical tensions and attacks on energy infrastructure escalate across the Middle East.

By 0045 GMT, Brent crude futures rose 1% to $108.68 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 1% to $103.45 a barrel, according to Reuters data. Both benchmarks are on track for a weekly gain of nearly 13%, their sharpest increase since mid-July, following a more than 6% rally on Thursday alone.

Geopolitical Risks Intensify

Market anxiety has been heightened by a series of recent events that threaten critical global oil transit chokepoints. Traders are closely monitoring several key developments:

• Red Sea Threats: Iran-aligned Houthis reportedly seized control of Yemen's port of Mocha on Thursday, posing a new risk to traffic in the Red Sea.
• Strait of Hormuz: Tanker attacks have intensified in and around the Strait of Hormuz, a vital artery for global oil shipments.
• Saudi Facilities Targeted: Attacks originating from Yemen on Saudi energy infrastructure have signaled a significant escalation of the regional conflict.

Adding to the uncertainty, U.S. President Donald Trump issued a warning to Iran, while Iran's Islamic Revolutionary Guard Corps has vowed to escalate its response to any further attacks, as reported by Reuters.

Market Impact and Outlook

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The escalating conflict is creating a significant geopolitical risk premium in crude prices. "With events spiralling... it is becoming increasingly likely that WTI crude will retest the $119.48 high from early March," IG analyst Tony Sycamore said in a note.

The supply squeeze is also impacting refined products. The U.S. national average price for diesel fuel surpassed $6 a gallon for the first time ever on Thursday, according to price tracker GasBuddy, which cited the U.S.-Iran conflict and Ukrainian attacks on Russian refineries as key factors.

Contrasting Demand Signals

While supply-side fears are driving the rally, the demand outlook remains a point of caution for the market. The Organization of the Petroleum Exporting Countries (OPEC) lowered its forecast for 2026 world oil demand growth to 380,000 barrels per day (bpd), its fifth consecutive downward revision, according to its latest monthly report.

This softening demand picture is coupled with falling production from the group, with a Reuters survey finding that OPEC oil output fell by 640,000 bpd in August. Analysts suggest the rally's sustainability will heavily depend on demand from China, the world's largest crude importer, whose continued purchasing could amplify the effect of any supply disruptions.