Weekly gains in crude oil prices surged above 8% as escalating tensions in the Middle East, attacks on energy infrastructure, and fears of supply disruptions pushed prices above $100 a barrel, despite Friday’s decline.
Brent, the international benchmark, closed down 2.8% at $104.61 a barrel, while U.S. West Texas Intermediate (WTI) fell 2.4% to $100.05 a barrel.
Friday’s decline followed a powerful rally in the preceding days, with Brent reaching around $108 a barrel on Thursday and WTI climbing above $104.
On a weekly basis, Brent gained 8.7%, ending the week above the key $100 level, while WTI rose 9.4%. Friday’s decline ended a five-session winning streak for Brent and an eight-day run of gains for WTI.
A Double Front of Concerns in the Middle East
Markets remain on alert over the possibility of a prolonged Iran–U.S. conflict, as escalating tensions in the region increase risks to global energy flows.
Friday’s decline in prices was partly linked to reports that Iran would hold talks with Gulf countries in Oman over the Strait of Hormuz, suggesting that some diplomatic channels remain open despite the heightened tensions of recent days.
The Strait of Hormuz is at the centre of the energy crisis, as it is a critical route for the transportation of oil and liquefied natural gas. Before the outbreak of the war, roughly one-fifth of the world’s oil and LNG supply passed through the area.
At the same time, investors are closely monitoring the situation in the Red Sea following increased Houthi activity in Yemen and concerns over potential repercussions for Saudi Arabian exports.
Saudi Arabia’s Key Pipeline in Focus
Fresh concerns emerged over reported damage to Saudi Arabia’s critical East-West pipeline, which enables the kingdom to transport oil to the Red Sea and reduce its reliance on the Strait of Hormuz.
Saudi Arabia ultimately suspended operations of the East-West oil pipeline temporarily as a precautionary security measure following multiple attacks on the infrastructure, the kingdom’s Ministry of Energy announced on Friday.
According to the ministry, the pipeline was targeted in attacks in the Riyadh and Medina regions on Thursday morning. Several people were injured in the incidents, the ministry said.
Satellite imagery showed smoke near the infrastructure, while reports indicated damage to a pumping station following an attack attributed to militants with links to Iran.
The development came as the International Energy Agency (IEA) announced that Saudi Arabia’s crude oil production fell by 2.3 million barrels per day in August to 6 million barrels per day, its lowest level in more than three decades.
“Once again, geopolitical fears are driving everything,” said Jim Reid of Deutsche Bank, noting that concerns over shipping security in the Red Sea and the potential impact on Saudi exports had intensified pressure on markets.
U.S. Diesel Prices Hit Record High
Disruptions to oil supplies caused by the war in the Middle East, combined with Ukrainian attacks on Russian refineries, pushed the average U.S. diesel price above $6 per gallon for the first time.
“Refined products, particularly diesel, are being hit from both sides at the moment,” said Tim Waterer, chief analyst at KCM Trade, pointing out that restrictions on shipping in the Gulf and disruptions at Russian refineries are adding upward pressure on fuel prices.
How Long Can the Rally Last?
Analysts remain divided over whether the current tightness in the oil market represents a structural problem or a temporary disruption.
Tamas Varga of PVM Oil Associates noted that another price increase cannot be ruled out, with a possible retest of the $126-a-barrel high recorded in April as global inventories decline.
However, he stressed that the higher prices rise, the more demand is likely to be constrained.
According to Varga, the current crisis differs from the 1990 Gulf War, as the oil market is now more flexible, while renewable energy sources can replace some oil consumption, particularly in power generation.
The expectation is that the balance between global supply and demand will eventually be restored either through increased production in the event of a ceasefire or through weaker demand resulting from greater use of alternative energy sources.
Until then, analysts warn that volatility in the oil market is likely to remain exceptionally high.
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