Global oil prices ended the week higher, extending their rally and holding above the psychologically significant $100 per barrel mark as escalating tensions in the Middle East and the closure of the strategic Strait of Hormuz heightened concerns about global supply disruptions and a potential inflationary shock.
Benchmark crude contracts rose on Friday. Brent crude futures for May delivery climbed 3.2 per cent to settle at $103.69 per barrel, while U.S. West Texas Intermediate (WTI) crude gained 3.7 per cent to close at $99.31 per barrel.
The latest gains capped a volatile trading period for oil markets, with prices surging dramatically since hostilities involving Iran escalated in late February. Over the past two weeks, Brent crude has jumped by more than 43 per cent, while WTI has climbed 48 per cent.
The rally reflects mounting concerns over disruptions to energy supply routes in the Middle East, particularly following the effective closure of the Strait of Hormuz, a narrow maritime corridor through which nearly one-fifth of global oil supply is transported.
Oil prices have experienced extreme swings during the week. At one point, Brent briefly rose close to $120 per barrel before retreating to below $90 as traders weighed the likelihood of prolonged supply disruptions against emergency measures aimed at stabilising the market.
On Friday, crude prices initially opened lower after the United States signalled steps to ease supply constraints. The U.S. Treasury Department said it would permit the purchase of Russian oil shipments already at sea in an effort to offset disruptions caused by the conflict in the Middle East.
According to U.S. Treasury Secretary Scott Bessent, the decision is intended to stabilise global energy markets amid the supply shocks triggered by the ongoing war with Iran. Washington has also issued waivers allowing certain countries, including India, to continue importing crude from Russia.
In addition, the United States is reportedly considering deploying naval escorts for commercial vessels navigating the Strait of Hormuz, as part of efforts to secure shipping routes through the volatile region.
Attempts to cool the market have also included a large-scale release of emergency oil reserves.
The International Energy Agency (IEA) announced the largest coordinated release of strategic oil reserves in its history, injecting approximately 400 million barrels into the market in an effort to offset potential supply shortages.
Analysts say the move, alongside temporary easing of sanctions on certain Russian oil cargoes, could help mitigate some of the immediate supply pressures.
However, market participants remain cautious as geopolitical risks continue to cloud the outlook for global energy supply.
Analysts at research firm Vital Knowledge noted that the situation may not yet represent a worst-case scenario for oil markets.
“Iranian crude is still exiting the Strait of Hormuz, and there are indications that certain countries could resume shipments from the waterway,” analysts led by Adam Crisafulli said in a market note.
They also highlighted alternative supply routes, including pipelines in Saudi Arabia and the United Arab Emirates that bypass the Strait of Hormuz and allow limited volumes of oil to reach global markets.
Despite these mitigating factors, the conflict has raised concerns that prolonged disruption to energy flows could trigger a global inflationary shock.
Higher oil prices typically feed into broader economic costs, raising transportation, manufacturing and energy expenses across economies.
Such developments could complicate monetary policy decisions for central banks, many of which are still grappling with inflationary pressures.
The current crisis entered its thirteenth day on Friday as hostilities between Iran and its adversaries intensified, with Tehran launching missile and drone strikes targeting energy infrastructure in parts of the Middle East.
Iran’s new Supreme Leader, Mojtaba Khamenei, has threatened to block the Strait of Hormuz entirely, a move widely interpreted by analysts as an attempt to gain strategic leverage in the conflict.
Despite the recent rally in prices, some analysts remain uncertain whether oil will sustain its current levels.
Analysts at Capital Economics noted that financial markets currently assign only a moderate probability to oil prices remaining above $100 per barrel in the medium term.
According to Kieran Tompkins, senior climate and commodities economist at the firm, options markets currently imply roughly a one-in-five chance that Brent crude will still be trading at $100 or higher within three months.
Other analysts argue that prices would need to climb significantly higher to match the scale of historical energy supply shocks.
Economists at JPMorgan noted that previous major disruptions since the 1970s pushed oil prices more than 50 percent above their two-year average for extended periods.
At current levels, Brent crude is estimated to be less than 35 percent above its two-year trailing average price.
To replicate shocks comparable to past geopolitical crises, analysts say crude prices would likely need to climb toward $150 per barrel and remain elevated for several months.
Market observers say the trajectory of oil prices will depend heavily on developments around the Strait of Hormuz and the broader geopolitical situation in the Middle East.
Analysts at ANZ warn that the crisis may be evolving from a short-term geopolitical shock into a more structural supply disruption.
“The longer the disruption persists, the higher the price required to restore balance in the global oil market,” the bank said in a research note.
