US oil prices notched their biggest weekly gain since at least 1985 on Friday as the conflict headed toward the one-week mark and the critical Strait of Hormuz remained essentially closed off to through-traffic.
US benchmark West Texas Intermediate crude (CL=F) gained over 38% since the close of trading on Friday before the conflict began to briefly cross $92 per barrel. Meanwhile, Brent crude (BZ=F), the international pricing benchmark, gained roughly 30% to trade above $94 per barrel, its biggest weekly gain since April 2020.
The two benchmark products are now trading at prices not seen since April 2024 for Brent, and since at least October 2023 for WTI, as they continue a roaring rally driven by one of the largest supply shocks in years. Analysts say there’s a chance they go even higher.
Read more: How oil price shocks ripple through your wallet, from gas to groceries
“We are growing more confident that without an agreement and a fast cessation of all kinetic activity, the crude market will begin to break in days, and not in weeks or months,” Vikas Dwivedi, global energy strategist at Macquarie, said.
Roughly one-fifth of the world’s seaborne oil supply crosses through the Strait in normal times. As that transit has come to a halt, the stoppage has left roughly 16 million barrels in limbo, trapped in the Persian Gulf with only limited diversions to reach buyers, according to data from Vortexa.
With nowhere to send their oil, producers have begun to cut back, signaling a deeper lack of supply to the market. Iraq announced on Tuesday that it was cutting 1.5 million barrels per day (bpd) of production, and the Wall Street Journal on Friday reported that Kuwait is following suit. If the Strait of Hormuz remains unnavigable, production cuts would likely rise to 3.3 million bpd by day eight; to 3.8 million bpd by day 15; and to 4.7 million bpd by day 18, according to research from JPMorgan Chase analysts.
At the same time, attacks from Iran in the first 36 hours of the conflict covered a wide swath of the Middle East but remained focused primarily on military and civilian infrastructure. Over the past few days, the regime has increasingly shifted its sights to key energy infrastructure, threatening to disrupt the global oil supply chain even further.
Since Tuesday, Bahrain’s Bapco Energies refinery has been attacked; Saudi Arabia’s Ras Tanura refinery has been taken offline; and Qatar’s Ras Laffan LNG complex has declared force majeure. Oil tankers in the Persian Gulf have been struck by missiles and drones, and Iran’s Revolutionary Guards have threatened violence against any ship that attempts to cross the Strait, even as they declare the passage nominally “open.”
