Oil up after US threatens Iran with 'indefinite' blockade and financial pain

Oil prices rose on Friday amid ongoing tensions between the United States and Iran, as Washington threatened Iran with an indefinite blockade and financial sanctions. Brent crude, the benchmark for two-thirds of the world's oil, climbed 1.03% to $87.97 a barrel, while West Texas Intermediate gained 1.62% to $82.56 per barrel. US Defense Secretary Pete Hegseth stated that the US navy could maintain a blockade in the Strait of Hormuz indefinitely by rotating ships in and out.

US Treasury Secretary Scott Bessent hinted at more financial measures against Iran, promising "measures like have never been seen in the history of economic isolation on a country." The ongoing US-Iran conflict and Houthi aggression in the Red Sea have kept oil prices elevated this week, with crude prices on track for a weekly gain of nearly 6%.

The International Energy Agency has lowered its 2026 global oil supply forecast due to the Strait of Hormuz closure and attacks in the Bab Al Mandeb strait, while the US Energy Information Administration anticipates oil disruptions from the Iran war until the end of next year. The diplomatic gridlock between the US and Iran creates uncertainty, reflected in a risk premium embedded in oil prices.