Brent Up More Than 8% on the Week

Brent traded slightly lower around $95 a barrel on Friday but was up nearly 8% for the week, marking its strongest weekly performance since mid-July, as tensions between the US and Iran continued to drive market sentiment. US-Iran strikes resumed this week for the first time in about a month, reigniting concerns over supply disruptions. Israeli warnings that it would “cripple” Iran’s military and civilian infrastructure also weighed on sentiment. Meanwhile, US Vice President JD Vance said on Thursday that Washington does not plan to hold talks with Tehran unless Iran stops attacking commercial shipping in the Strait of Hormuz. However, there were signs that crude supplies were still reaching the market and Iraq’s oil exports rose in August and are expected to increase further in September. Meanwhile, OPEC+ is likely to keep its oil output policy unchanged for October at its meeting on Sunday.

Brent crude traded near $95 per barrel on Friday and was on track for a gain of about 8% this week, underpinned by renewed hostilities in the Middle East and growing uncertainty surrounding shipping through the Strait of Hormuz. The US carried out fresh strikes against Iran this week following roughly a month of relative calm, prompting Tehran to retaliate by targeting American bases in the region and vessels passing through Hormuz. Six commodity vessels transited the strait on Wednesday, down from 11 on Tuesday and compared with a 10-day average of nearly 13. Damage to refineries in the Middle East and Russia, coupled with limited capacity elsewhere to compensate for supply disruptions, is also expected to keep global fuel prices elevated into next year. Meanwhile, US diesel prices reached their highest level since mid-2022 this week, while inventories in Europe remain well below seasonal norms.

Brent rose above $95.50 a barrel on Thursday, extending a rally on Iran continued strikes against US Gulf allies. Kuwait’s armed forces said the kingdom was facing “ongoing Iranian aggression” as its air defenses engaged missiles and drones. Iran retaliated after US strikes on Tuesday by targeting US regional allies Jordan and Bahrain. Six commodity vessels transited the Strait of Hormuz on Wednesday, down from 11 on Tuesday and compared with a 10-day average of nearly 13. Japan’s Mitsui O.S.K. Lines, the world’s largest tanker operator, expects disruptions at the Strait of Hormuz to persist longer than previously anticipated, with no normalization by year-end following this week’s renewed escalation in hostilities. Damaged refineries in the Middle East and Russia, along with insufficient capacity elsewhere to offset supply disruptions, are likely to keep global fuel prices elevated into next year.