Oil prices continued to rise for a second consecutive session on Friday, driven by renewed concerns regarding the Strait of Hormuz. This development follows Iran’s proposal, in collaboration with Oman, to restrict the passage of vessels deemed hostile and to impose significant penalties on those who violate the proposed regulations. Brent crude futures increased by 99 cents, representing a 1.2% rise, reaching $83.48 per barrel. Meanwhile, U.S. West Texas Intermediate crude saw an uptick of 85 cents, or 1.1%, settling at $78.84 per barrel. The latest gains followed a rise in oil prices, which settled more than $3 a barrel higher on Thursday. This increase was influenced by reports indicating that Iran was considering legislation to prohibit U.S. and Israeli vessels from transiting the Strait of Hormuz. The waterway has facilitated approximately one-fifth of global oil and liquefied natural gas shipments since prior to the onset of the conflict at the end of February.

Earlier this week, crude prices experienced a decline as optimism increased regarding a possible resolution to the conflict. However, Brent moved back above the 80 mark on Thursday after briefly slipping below it for the first time since July 13. Iran’s Fars news agency reports that a parliamentary committee is currently reviewing a preliminary bill aimed at banning U.S., Israeli, and other vessels deemed hostile from navigating the Strait of Hormuz. The proposal also seeks to impose fines of up to 20% of the cargo value on vessels that contravene the restrictions. In a separate statement, a senior Iranian official indicated that Tehran is pursuing transit fees ranging from 5% to 7% of the cargo value for vessels navigating the strait. Oman is contemplating fees in the vicinity of 3%, whereas the United States advocates for the elimination of any fees.

However, four industry sources indicated that the proposed arrangement would face significant challenges in implementation due to U.S. sanctions and insurance clauses that impose restrictions on such payments. In a development that exacerbates existing geopolitical tensions, Yemen’s Houthis announced the execution of missile and drone strikes targeting Saudi military positions in Marib and Hadramout on Thursday. Meanwhile, US President Donald Trump informed reporters on Thursday that he anticipated the war would conclude shortly. The trajectory of oil prices will largely depend on the duration of supply disruptions. JPMorgan posits that each extra month of disruption may elevate Brent crude prices by approximately $7 to $8 per barrel. If disruptions persist for a duration of three months, the bank anticipates that average monthly Brent prices will approximate $114 per barrel.

Goldman Sachs has cautioned that Brent may rise to $120 a barrel should shipping disruptions thru the Strait of Hormuz, the preeminent oil transit route globally, continue. That said, the brokerage’s base case posits that tensions in the Middle East will ultimately subside. Under that scenario, it anticipates Brent to average $80 a barrel in the fourth quarter and $75 a barrel in the following year. However, it acknowledged that the risks are skewed to the upside due to the potential for extended disruptions in the Strait of Hormuz and the Red Sea. “The direction of our outlook is unchanged; the path and the timeline have shifted. We still expect oil to cool as we move into 2027, for three reasons: supply outside the conflict zone is expanding, with OPEC+ raising production targets, the UAE at record output and non-OPEC barrels responding to price,” said Anindya Banerjee.