On Friday, oil prices experienced a decline but ended the week with notable gains, driven by escalating military tensions between the United States and Iran that heightened concerns over the stability of global energy supplies and shipping through the critical Strait of Hormuz.
Brent crude closed at $76.01 per barrel, while the US benchmark, West Texas Intermediate (WTI), settled at $71.41 per barrel. Despite the downturn on the final trading day, Brent recorded an increase of over 5% for the week, and WTI saw a rise of nearly 4%. These gains were largely fueled by fears of potential disruptions in oil supply amid the geopolitical turmoil.
The week was marked by significant volatility in crude prices as military exchanges between the US and Iran created uncertainty about the security of the Strait of Hormuz, a vital channel for the global oil trade. Meanwhile, there was a glimmer of hope for market stability following reports that the US remains open to diplomatic engagement with Iran, notwithstanding the ongoing military confrontations. However, the situation was further complicated by the US decision to revoke a waiver that previously permitted limited Iranian oil exports, thereby exerting additional pressure on the global supply chain.
The heightened tensions have led to a noticeable slowdown in shipping activity through the Strait of Hormuz, with a reduction in the number of large oil tankers traversing the passage. In response to the military developments, Iran has cautioned that it may impose further restrictions on commercial traffic, while the US has reiterated its commitment to ensuring the freedom of navigation in the region.
Analysts suggest that oil prices will likely continue to experience volatility as investors keep a close watch on the unfolding situation in the Middle East, looking for any signs of progress toward resolving the conflict and stabilizing the crucial shipping route.