Crude Oil Prices Rise Amid Renewed Supply Concerns from US-Iran Tensions
Oil prices increased slightly on Friday, driven by renewed concerns over crude supplies following the United States’ threat to maintain a naval blockade of Iran indefinitely. Brent crude futures rose by 9 cents to $87.16 a barrel, while US West Texas Intermediate (WTI) crude gained 4 cents to $81.29 a barrel. This uptick comes after both benchmarks experienced a decline of more than 2% in the previous session.
US threatens prolonged blockade of Iran
The oil market is closely monitoring the potential for a prolonged conflict between the US and Iran, particularly its implications for crude supplies. On Thursday, the US announced it could sustain a naval blockade of Iran indefinitely and would intensify economic pressure on Tehran as ceasefire negotiations have stalled. US Treasury Secretary Scott Bessent indicated that further measures against Iran are forthcoming, stating, “Watch this space for more announcements coming next week because we are going to apply measures like have never been seen in the history of economic isolation on a country.” This stance has raised concerns about the possibility of ongoing disruptions to oil flows in the region.
Strait of Hormuz remains key to oil supply
Iran has been restricting traffic through the Strait of Hormuz, a crucial global oil shipping route that previously accounted for about 20% of the world’s oil supply. Hossein Taeb, the newly appointed head of Iran’s Basij paramilitary force, claimed that the strait is “under the management and control of the Islamic Republic.” Tensions escalated further when two vessels belonging to the state-owned Abu Dhabi National Oil Company were reportedly attacked while transiting the strait, an incident described by the UAE government as an Iranian attack.
Demand concerns limit oil price gains
Despite the supply concerns, a weaker outlook for global oil demand is tempering price increases. Both OPEC and the International Energy Agency have revised their forecasts for demand growth downward this week. Additionally, US crude inventories saw their largest weekly increase in over three and a half years. Tim Waterer, chief market analyst at KCM, noted that the conflicting factors of supply and demand are preventing the market from making significant upward movements. He stated that the market remains supported but struggles to rise meaningfully amid these opposing pressures.
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