US crude futures surged nearly 10% on Friday, closing within reach of Brent despite a tightening supply situation. The effective closure of the Strait of Hormuz due to escalating tensions between Iran and the US-Israel coalition pushed up prices. At 10:37 am CST (16:37 GMT), West Texas Intermediate (WTI) reached $88.96 per barrel, an increase of nearly 9.8%, while Brent climbed to $90.83, marking its highest point since April.
This week saw the strongest weekly gain in US crude markets since the early days of the pandemic in spring 2020. The closure of oil exports through the vital Strait of Hormuz has cut off about two-thirds of daily Gulf oil flows, intensifying concerns over a potential supply crunch. Traders and refiners are scrambling to find alternative sources amid heightened fears of soaring prices.
A key analyst, Giovanni Staunovo from UBS, emphasized that the US is currently the world’s largest crude producer. To prevent inventories from being drained too rapidly via excessive exports, the price gap between WTI and Brent has widened back towards transportation costs. The situation underscores the vulnerability of global energy markets to geopolitical events.
Qatar’s energy minister, speaking to the Financial Times on Friday, forecasted that Gulf oil producers could halt all export activities within weeks. He predicted this could push crude prices as high as $150 per barrel, suggesting a severe market upheaval is imminent. Meanwhile, John Kilduff of Again Capital posited that forecasts for “$100 a barrel” might soon come to pass.
The conflict’s repercussions extended beyond the Strait of Hormuz. Strikes by US and Israel against Iran last Saturday have disrupted energy exports from key Middle Eastern regions, including Iraq and Kuwait. Both countries have already announced cutbacks in output.
Crude prices surged above $90/bbl for the first time since April 2024 as shipping through the Strait became effectively closed for seven consecutive days. This drastic reduction in supply has pushed global demand-supply balance into a precarious position, potentially leading to significant price increases.
US President Donald Trump dismissed concerns about gasoline prices linked to the conflict, maintaining that military operations remain his top priority. However, these statements sparked debate on how quickly and forcefully the administration could respond to energy price volatility amid ongoing hostilities.
The US Treasury Department’s decision to grant waivers for sanctioned Russian oil imports has eased some supply constraints, though it also exposed broader policy tensions over sanctions enforcement. By Thursday, Indian refiners had already purchased millions of barrels of Russian crude in defiance of months-long pressure from global authorities seeking to curb these purchases amid Russia’s ongoing conflict with Ukraine.
Despite initial concerns about US Treasury intervention, Bloomberg News reported that this approach would not be pursued at present. Ship-tracking firm Kpler estimated an additional 30 million barrels of Russian oil available for export through the Indian Ocean and other key shipping routes, highlighting the significant role of unregulated trade channels in maintaining market balance during uncertain times.
As negotiations over Iran’s nuclear program continue, markets remain highly sensitive to geopolitical shifts. The potential closure of Gulf oil exports could send crude prices sharply higher if not managed effectively by policymakers and industry stakeholders alike.