On Friday, US crude oil futures experienced a dramatic surge, climbing over 12% as tensions in the Middle East escalated, severely impacting global oil supply routes. Despite this sharp rise, US crude prices remained slightly below Brent crude, as buyers scrambled to secure available barrels amid tightening supplies. The ongoing conflict involving the United States, Israel, and Iran has effectively halted shipments through the strategic Strait of Hormuz, a critical chokepoint for global energy exports.
Brent crude futures closed the day at $92.69 per barrel, marking an increase of $7.28 or 8.52%, while West Texas Intermediate (WTI) crude ended at $90.90 per barrel, up $9.89 or 12.21%. Notably, this marked the second consecutive day where US crude futures outperformed Brent, reflecting heightened demand for American oil as Middle Eastern supplies remain constrained. This divergence highlights the shifting dynamics in global oil markets amid geopolitical instability.
Industry experts point out that refiners and trading firms are actively seeking alternative sources to compensate for the disrupted Middle Eastern output, with the United States emerging as the largest available producer. Giovanni Staunovo, an analyst at UBS, explained that to avoid rapid depletion of US inventories through excessive exports, the price spread is adjusting to reflect transportation costs. This adjustment underscores the logistical challenges faced by the market in balancing supply and demand under current conditions.
Janiv Shah, vice president of oil analytics at Rystad Energy, attributed the widening gap between WTI and Brent prices over the past two days to several factors. These include stronger refinery operations along the US Gulf Coast driven by favorable margins and arbitrage opportunities with European markets, as well as the influence of Washington’s futures market activity. Such developments indicate a complex interplay between regional refinery economics and broader geopolitical risks.
The week’s price movements have positioned crude oil for its most significant weekly gain since the extreme market volatility witnessed during the early months of the COVID-19 pandemic in spring 2020. The conflict in the Middle East has disrupted not only shipping lanes but also energy exports through the Strait of Hormuz, a vital artery for global oil trade. This closure has sent shockwaves through international markets, raising concerns about prolonged supply shortages.
Adding to the uncertainty, Qatar’s energy minister recently warned that all Gulf energy producers might halt exports within weeks if the situation deteriorates further. He suggested that such a scenario could drive oil prices as high as $150 per barrel. John Kilduff, a partner at Again Capital, echoed these concerns, describing the unfolding events as a worst-case scenario that could validate forecasts of crude reaching $100 per barrel or more.
The sharp rally in oil prices began after the United States and Israel launched military strikes against Iran last Saturday, prompting Tehran to block tanker movements through the Strait of Hormuz. This waterway typically handles oil shipments equivalent to roughly 20% of global demand each day. With the strait effectively closed for a full week, approximately 140 million barrels of oil—representing about 1.4 days of worldwide consumption—have been prevented from reaching international markets.
The conflict has further spread across key energy-producing regions in the Middle East, causing disruptions in output and forcing the shutdown of several refineries and liquefied natural gas (LNG) plants. Staunovo emphasized the direct correlation between the duration of the Strait’s closure and rising oil prices, warning that prolonged disruptions would continue to push prices upward. He also noted that initial market expectations that the US administration might de-escalate the situation to avoid high oil prices are fading as risks become more apparent.
In a recent interview, US President Donald Trump expressed a dismissive stance regarding the rising gasoline prices linked to the conflict, stating, “if they rise, they rise.” This comment came amid growing public concern over the impact of soaring fuel costs on the American economy. Meanwhile, the possibility of intervention by the US Treasury Department to mitigate energy price hikes briefly caused oil prices to dip by more than 1% early Friday. However, these losses were quickly reversed after reports emerged that the administration had decided against using the Treasury to trade oil futures.
On a related note, the US Treasury granted waivers allowing certain companies to continue purchasing sanctioned Russian oil. The initial waivers were issued to Indian refiners, who have since acquired millions of barrels of Russian crude. This move reflects the complex geopolitical landscape influencing global energy trade, as countries navigate sanctions and supply chain disruptions amid escalating tensions.
