Oil prices set for weekly gain as US-Iran hostilities intensify

Oil prices edged slightly higher on Friday, but remained on course for their biggest weekly surge since mid-July, driven by heightened U.S.-Iran tensions and looming supply risks in the Middle East. Concerns over potential supply disruptions and attacks on Russian refineries by Ukraine spurred average U.S. diesel prices to record highs.

Brent crude futures held steady at $95.52 a barrel, while U.S. West Texas Intermediate (WTI) crude futures rose 7 cents, or 0.1%, to $91.36. Nonetheless, Brent prices increased 7.6% and WTI climbed 10.4% over the week, positioning the benchmarks for their strongest gains since the week of July 20.

Escalating U.S.-Iran hostilities in September marked the fiercest clashes between the two nations since the July 2026. The war, now in its seventh month since U.S.-Israeli strikes in late February, saw Israeli Defence Minister Israel Katz warning of potential damage to Iran's military and civilian infrastructure, including energy facilities. ANZ analysts upgraded their Brent crude forecast to $95 a barrel in the short term, noting upside potential if the Middle East conflict escalates further.

The market entered a delicate balancing phase as elevated inventories absorbed the initial supply shock, but the challenge now was maintaining market equilibrium as those buffers dwindled. U.S. Vice President JD Vance stated on Thursday that Washington would not engage in talks with Iran unless Tehran ceased attacking commercial shipping in the Strait of Hormuz.

However, Russian President Vladimir Putin suggested a possible path to resolving the Ukraine war, with both the United States and China ready to support a peace settlement.

Iran extended its list of non-compliant vessels subject to fines, confiscation or detention if they attempt to pass through the Strait of Hormuz. Iraqi ships remain among the few cleared for transit, and Iraqi oil exports surged to about 2.34 million barrels per day in August, up from 1.35 million bpd in July, according to two Iraqi energy officials. September exports are also expected to rise, as heavy discounts and Iranian approvals for Iraqi tankers incentivized buyers.