Oil prices increased once more on Friday, with both primary benchmarks poised to conclude the week exceeding $100 a barrel for the first time since mid-May. This rise occurred as increased attacks along key Middle East shipping routes heightened concerns about a prolonged disruption to oil supplies. Iran-aligned Houthis seized control of Yemen’s port of Mocha on Thursday, posing an additional risk to maritime traffic in the Red Sea. Traffic through the Strait of Hormuz continues to face restrictions, as recent days have seen an escalation in tanker attacks within the region. Brent crude futures increased by $1, representing a 1% rise, reaching $108 per barrel, whereas US West Texas Intermediate crude advanced by 95 cents, also a 1% increase, to $103.45 per barrel. Both benchmarks experienced an increase exceeding 6% on Thursday. For the week, the two benchmarks experienced an increase of nearly 13%, positioning them for their most substantial weekly gain since the week concluding on July 17.

The attacks from Yemen on Saudi energy facilities have expanded the conflict’s dimensions beyond Iran and the Strait of Hormuz, heightening concerns that disruptions may continue throughout the broader region. US President Donald Trump cautioned that the US might target Iran’s Pickaxe Mountain, located near the severely compromised Natanz uranium enrichment site. He also stated that the conflict would conclude following the November midterm elections. Iran announced that it targeted 10 vessels in proximity to the Strait of Hormuz on Wednesday, following the US’s action against five Iranian oil tankers. Iran’s Islamic Revolutionary Guard Corps announced its intention to intensify its response to any additional attacks. Tim Waterer noted that the recent fluctuation in oil prices is indicative of both physical supply constraints and an associated geopolitical risk premium. “Right now the risk premium is doing a lot of the heavy lifting,” he told. Waterer anticipates that oil prices will continue to be high as long as the Strait of Hormuz remains a contested area and diplomatic initiatives are unstable.

The risks for oil prices are increasingly skewed toward the upside as the likelihood of additional disruptions escalates. Daan Struyven indicated that the recent attacks imply a potential escalation in shipping disruptions, which could become more widespread and severe. Goldman Sachs has delineated a situation where oil prices might escalate to $120 a barrel should assaults on Middle Eastern vessels become more pronounced. If exports return to normal, the bank anticipates that oil prices will trend back toward $80 a barrel. Struyven indicated that risks associated with shipping have emerged as a significant factor influencing oil prices. Struyven indicated that Goldman Sachs perceives “meaningful upside to crude oil prices” and anticipates a rise in natural gas and refined product prices as well. He stated that supply shocks in petrol and fuels are more significant than those observed in the crude market.

The duration of the disruption will be pivotal for oil prices. JPMorgan estimates that each additional month of disruption could increase Brent prices by approximately $7 to $8 per barrel. If the disruption persists for three months, the bank anticipates average monthly Brent prices to approximate $114 per barrel. Citi has increased its average Brent crude price forecast for the third quarter to $86 a barrel from $80, attributing this adjustment to a longer-than-anticipated timeline for the reopening of the Strait of Hormuz. Analysts have revised their short-term Brent forecast upward to $95 a barrel, cautioning that prices may increase further should the conflict in the Middle East intensify. It was indicated that a prolonged standoff characterised by calibrated military action between the US and Iran seems to be the most probable outcome, potentially postponing the full resumption of Middle Eastern supply.