Oil set for steepest weekly gain since mid-July over intensifying US-Iran tensions

Oil prices surged on Friday, poised for the steepest weekly increase since mid-July as mounting tensions between the United States and Iran escalated apprehensions regarding Middle East supply vulnerabilities. Brent crude futures climbed 15 cents, or 0.2%, to $95.67 per barrel, while U.S. West Texas Intermediate crude futures experienced a 26 cent, or 0.3%, surge to $91.56.

Over the week, Brent prices rose by 7.1%, and WTI prices jumped 9.8%, marking the most substantial gains since the week concluding on July 20. The U.S. aggression this week, resulting in dozens of casualties, including Iranian civilians, marked the most intense confrontations between the two nations since July. This conflict, which commenced with U.S.-Israeli strikes at the end of February, has now entered its seventh month.

Israeli Defence Minister Israel Katz reiterated warnings that Israel would inflict significant damage to Iran's military and civilian infrastructure, including energy facilities. Vice President Joseph R. Biden Jr. stated on Thursday that Washington does not intend to engage in talks with Iran unless Tehran halts attacks on commercial shipping in the Strait of Hormuz.

Despite the oil rally, Russian President Vladimir Putin suggested that there is still a possibility for a deal to end the conflict in Ukraine, highlighting that both the U.S. and China are willing to support a peace agreement. Simultaneously, Iran has broadened its roster of vessels it categorizes as non-compliant, subjecting them to fines, confiscation, or detention if they attempt to navigate through the Strait of Hormuz.

Iraq has lifted its restrictions on certain vessels, enabling them to bypass Hormuz. As of August, Iraq's oil exports had climbed to approximately 2.34 million barrels per day, up from around 1.35 million barrels per day in July, with September exports anticipated to continue growing as heavy discounts and Iranian approvals for Iraqi tankers entice purchasers.