Brent crude oil edged lower on Friday but remained on track for its second consecutive weekly gain, as escalating U.S.-Iran tensions continued to prop up energy markets.
Brent crude slipped 0.15% to $93.64 per barrel on Friday, while West Texas Intermediate fell 0.09% to $86.75. Despite the modest pullback, Brent has risen more than 5% this week alone and remains approximately 38% higher than a year ago, reflecting the persistent geopolitical premium embedded in global oil pricing since the U.S.-Iran conflict escalated earlier this year.
Sanctions and Blockade Keep Supply Tight
The U.S. reimposed a naval blockade on Iranian oil exports this week and threatened what President Trump called the toughest financial penalties in history against any country or entity that continues to purchase Iranian crude. Iran responded on Friday, warning that any further American escalation would draw a devastating counter-strike.
The U.S. is taking a very firm stance against Iran, with the blockade back in place and threats of tougher sanctions on Iranian oil exports, and that is why we are seeing oil prices back above $90 a barrel, ANZ analyst Soni Kumari told Reuters.
The supply constraints have tightened global crude availability at a time when inventories remain low across major consuming nations. Strategic petroleum reserves in the U.S. have been drawn down significantly during the conflict, leaving limited buffers against further disruptions. Analysts at Wood Mackenzie warned earlier this month that the situation is not a natural commodity cycle and that the price surge reflects geopolitical conflict rather than underlying demand.
Impact on Inflation and Central Banks
The sustained elevation in oil prices has complicated the outlook for central banks worldwide. Higher energy costs feed directly into consumer price inflation, potentially forcing the Federal Reserve and its counterparts to maintain tighter monetary policy for longer than markets had anticipated. Rising oil has been a key driver behind the surge in Treasury yields this week, contributing to the selloff in equities that saw the S&P 500 post its steepest weekly decline since late July before Friday partial recovery.
In the Gulf, the ripple effects are already visible. The UAE announced August fuel price increases of nearly 6% across all gasoline grades, citing the volatile oil market. Meanwhile, the Strait of Hormuz remains a critical flashpoint, with occasional disruptions threatening to choke off the passage through which roughly 20% of the world oil supply transits.
Markets will be closely watching any diplomatic signals from Washington or Tehran over the weekend. A de-escalation could send crude sharply lower, while any further military incidents in the Persian Gulf could push Brent back toward the $100 mark last briefly touched in late July.
Sources: Reuters; TheStreet; ANZ Research; Wood Mackenzie; The National
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