Oil prices experienced a decline during Asian trading on Friday, following five consecutive sessions of increases. Nevertheless, they are poised for a significant weekly rise, as the intensifying conflict in the Middle East has heightened concerns regarding potential disruptions to global supply. As of 21:53, expiring in May decreased by 1.5% to $84.13 per barrel, whereas West Texas Intermediate crude futures declined by 2% to $79.44 per barrel. Brent oil experienced an increase of nearly 5% in the prior session, reaching its peak since July 2024, while WTI oil saw a rise exceeding 8%. Both contracts are positioned to increase by over 17% this week, assuming the gains are maintained.
Market participants secured gains after a significant surge earlier in the week; however, prices remained buoyed by escalating geopolitical tensions and concerns regarding the safety of critical shipping lanes. The conflict in the Middle East has now reached its seventh day as of Friday, with hostilities between the U.S., Israel, and Iran showing signs of further escalation. Missile strikes, retaliatory attacks, and disruptions to energy infrastructure across the region have maintained a state of tension in global energy markets. U.S. President Donald Trump expressed his desire to influence the selection of Iran’s next leader following the resolution of the conflict. Oil prices have experienced a significant increase this week. Concerns have centered on the Strait of Hormuz, a constricted passage between Iran and Oman that functions as the globe’s most critical oil transit corridor.
Approximately 20% of the global oil supply transits the Strait of Hormuz daily, establishing it as a vital chokepoint in the international energy trade. Any disruption to shipments through the strait could significantly tighten global supplies and push prices sharply higher. The market continues to exhibit strong support, with limited indications of de-escalation in the Middle East and a restoration of energy flows in the area,” noted analysts. It is evident that as time progresses without the resumption of flows, the oil market will adjust its pricing to account for the supply that has been lost, thereby creating potential for an upward movement in prices,” they noted.
In a strategic decision aimed at alleviating supply concerns, the U.S. has announced a temporary allowance for the sale of Russian oil to India, effective for a duration of 30 days. Although this may exert some short-term downward pressure on the market, it does not represent a significant shift in dynamics. According to analysts, the sole method for achieving a sustained reduction in prices is the resumption of oil flows through the Strait of Hormuz. Analysts indicate that the increase in oil prices may exacerbate inflationary pressures worldwide, particularly if the conflict leads to prolonged supply disruptions. Elevated energy expenses may further complicate the projections for central banks, including the U.S. Federal Reserve.