Oil Rises Again for Week, Middle East War Key to Hormuz Supply
Oil prices are headed for another weekly rise as the Middle East conflict continues, the Strait of Hormuz is nearing closure, and attacks spread across the region. Brent is trading around US$109 per barrel and is up about 6% this week, after closing at its highest level since mid-2022 on Thursday. Volatility remains high, with daily movements averaging more than US$10 since the conflict began, particularly after overt attacks on energy infrastructure.
The latest escalation has seen Iran continue its attacks on neighboring Persian Gulf states, despite Israel's assertion of restraint from targeting Iranian energy facilities and U.S. President Donald Trump's efforts to curb escalation in oil and gas assets. The attack on Iran's South Pars gas field earlier this week was followed by Tehran's retaliation against several key facilities in the region, sending European oil and natural gas prices soaring as governments seek to limit the impact.
Brent has risen nearly 50% this month and outperformed WTI as the conflict enters its third weekend. The near-total shutdown of Hormuz has left supply "trapped" in the Persian Gulf and forced major OPEC producers to cut production. Consultancy FGE NexantECA believes the crisis has shifted from a transit/logistics issue to a direct attack on Middle Eastern energy infrastructure, making the market more vulnerable to upside rather than downside risks if the situation persists.
In recent trading, the Brent May contract rose 0.4% to US$109.06 per barrel in London, while WTI May was relatively flat at US$95.18. The WTI April contract, which expires in April, fell slightly to US$96.47. On the ground, the IRGC stated it was still capable of producing missiles; Kuwait shut down several units at its Al Ahmadi refinery after a drone attack, and Saudi Arabia reported a missile interception, stressing that operational risks remain high.
US efforts to contain prices, including the release of strategic reserves, have contributed to widening the WTI discount to Brent to around US$14 per barrel. This creates an unusual situation: Brent has the potential for a weekly gain, while WTI is actually heading for a weekly decline. In other energy markets, European natural gas prices have nearly doubled to pre-war levels, and fuel prices have also risen, reinforcing broader inflation risks and warnings from central banks that a prolonged war could lead to tighter monetary policy.
The IEA said the conflict has triggered the largest supply disruption in the history of the global oil market, with producers around the Gulf shutting in around 10 million bpd of production. The Wall Street Journal reported that Saudi Arabia's base case scenario is that prices could reach US$180 per barrel if the disruption persists until the end of April. RBC Capital Markets assesses that there are no signs yet that the conflict is becoming "limited," as Tehran remains effectively in control of Hormuz and the US attack on Kharg Island has not changed Iran's calculations.
Source: Newsmaker.id
