Crude Oil Holds Weekly Gain as Hormuz Risks Persist

Crude oil fell to $100 a barrel on Friday but remained 9% higher for the week as investors weighed diplomatic efforts to ease tensions around the Strait of Hormuz against continued fighting across the Middle East. Gulf foreign ministers are expected to meet their Iranian counterpart in Oman on Monday as part of efforts to secure support for a temporary arrangement to manage shipping through the strategic waterway. Meanwhile, the International Energy Agency sharply downgraded its outlook for oil demand, forecasting a 2.5 million-barrel-a-day contraction in 2026, the largest annual decline since the Covid-19 pandemic as higher fuel prices and tighter supplies weigh on consumption. The IEA said demand could fall further if the Iran conflict persists. OPEC has also reduced its 2026 demand-growth forecast for a fifth consecutive time. However, renewed advances by Iran-backed Houthi militants towards the Bab al-Mandeb Strait have raised fresh concerns over supply disruptions.

Crude oil slid to around $101 per barrel on Friday in a likely technical correction, but was still set to end the week sharply higher as the escalating conflict between the US and Iran fueled concerns over prolonged disruptions to global energy supplies. Top US officials reportedly warned President Donald Trump that the war could continue through the remainder of his term, which ends in January 2029. Meanwhile, Iranian leaders are reportedly determined to continue fighting despite mounting economic costs, viewing the conflict as an existential threat. They also claim that Tehran has managed to rebuild its missile capabilities and could intensify attacks on US and Gulf assets if Washington escalates its own strikes. Fighting has intensified over the past two weeks, with the US targeting Iranian oil tankers while Iran launched missiles at US warships and tankers in the Persian Gulf, as well as American assets in neighboring countries.

Crude oil rose past $103 a barrel on Thursday, its highest level since May 19th, as escalating tensions in the Middle East raised fears of prolonged disruptions to global energy supplies. Top White House advisers reportedly discussed with President Donald Trump the possibility that the Iran war could drag on past Inauguration Day in January 2029. Iran’s Houthi allies in Yemen struck several energy facilities in Saudi Arabia this week, raising concerns that the conflict was broadening. Saudi Arabia’s crude oil production fell sharply in August 2026, dropping by around 1.9 million barrels a day. Iran reported strikes on US warships and tankers in the Persian Gulf, while the US said it had hit 10 Iranian tankers. Adding to upward pressure on prices, oil tanker rates have jumped to record highs, while US crude inventories fell by 300,000 barrels in the week ended September 4th. In contrast, the EIA raised its forecast for US crude oil production in 2027 to 14.3 million barrels per day.