Oil Prices Slip but Remain Set for Strong Weekly Gain
Oil prices moved lower during Asian trading on Friday. However, both major benchmarks remained on track for a third consecutive week of strong gains.
Continued tensions between the United States and Iran, along with growing disruption risks across key Middle East shipping routes, kept the broader oil market supported.
Brent crude futures fell 0.6% to $100.09 per barrel, while West Texas Intermediate futures declined 0.6% to $91.62 per barrel.
Brent Crude Heads for Third Weekly Advance
Brent crude reached a two-month high during the week and remained approximately 14% higher over the five-day period.
This placed the international benchmark on course for its third straight weekly increase.
The rally has been driven by renewed military action between the United States and Iran, as well as growing concerns that regional oil supplies could face further disruption.
Houthi Attacks Raise Red Sea Supply Risks
Oil prices received additional support after Yemen’s Iran-backed Houthi group attacked tankers carrying Saudi oil in the Red Sea.
The vessels were targeted near the Bab al-Mandab Strait, one of the region’s most important shipping routes.
The attacks raised fears that the conflict could spread beyond the Strait of Hormuz and affect another critical passage used to transport energy supplies.
Trump Threatens Further Military Action
U.S. President Donald Trump warned of severe military consequences for Iran and the Houthis following the tanker attacks.
He promised what he described as major military punishment in response to the strikes.
Trump also said Iranian funds would be used to cover damage to ships, cargo and other property affected by the attacks.
The comments reinforced fears that the conflict could intensify further.
U.S.-Iran Diplomacy Appears to Weaken
The United States and Iran have continued exchanging strikes for almost two weeks.
At the same time, shipping activity through the Strait of Hormuz has remained disrupted and uncertain.
Reports that Iran rejected a U.S.-backed ceasefire proposal also reduced hopes of a near-term diplomatic solution.
The apparent collapse of negotiations added further support to crude prices by increasing the risk of prolonged supply problems.
Saudi Oil Routes Face Greater Pressure
Saudi Arabia had been using the Bab al-Mandab Strait as an alternative route to reduce its dependence on the Strait of Hormuz.
However, the latest Houthi attacks have placed that strategy under pressure.
The group had previously threatened to impose a naval blockade on Saudi Arabia, increasing concerns about the safety of vessels carrying Saudi crude.
Further disruption in the Red Sea could make it more difficult for producers to move oil out of the Middle East.
Global Oil Inventories Tighten
Global oil inventories were expected to decline during July after showing temporary improvement in the previous month.
The worsening conflict has reduced expectations that supply conditions will stabilize soon.
Any prolonged disruption to tanker traffic or export infrastructure could tighten the market further and keep prices elevated.
Higher Oil Prices Increase Inflation Concerns
The sharp rise in crude prices has renewed concerns about energy-driven inflation.
Higher fuel and transportation costs can increase expenses for companies and consumers across the global economy.
Persistent oil price strength could also make major central banks more cautious about cutting interest rates.
Policymakers may adopt a more restrictive approach if rising energy prices begin pushing inflation higher again.
Middle East Developments Remain the Main Driver
Oil’s short-term direction will continue to depend heavily on developments involving the United States, Iran and the Houthis.
Further military escalation or additional attacks on shipping routes could push prices higher.
A credible ceasefire or improvement in tanker traffic could ease supply concerns and place renewed pressure on crude markets.
