Key Points:
- Brent crude prices jumped 5% this week to near $108 a barrel as the conflict in the Middle East severely restricts the Strait of Hormuz.
- Global oil markets face a historic disruption with 10 million barrels of daily output halted across the Persian Gulf.
- President Donald Trump pushed to de-escalate energy attacks, widening the price gap between US crude and international benchmarks.
- Officials warn oil could soar to $180 a barrel by late April if the ongoing energy crisis and regional attacks continue.
Oil prices logged another weekly gain as the ongoing war involving Iran intensified. The conflict has essentially closed the Strait of Hormuz, stranding millions of barrels of oil in the Persian Gulf. Brent crude traded near $108 a barrel, climbing roughly 5% this week. Thursday saw the benchmark hit its highest closing price since mid-2022. The crisis triggers massive price swings, with oil jumping by more than $10 a day as missiles and drones constantly strike critical energy infrastructure across the region.
Iran continues to launch strikes against its Persian Gulf neighbors. This happens even after Israeli Prime Minister Benjamin Netanyahu promised he would avoid targeting the energy facilities of the Islamic Republic. Meanwhile, US President Donald Trump actively pushed to de-escalate the attacks on oil and natural gas assets. Earlier this week, a strike hit Iran’s South Pars gas field. Tehran quickly retaliated by attacking several key regional facilities. This fast exchange sent European natural gas and global crude prices soaring.
Bjarne Schieldrop, the chief commodities analyst at SEB AB, noted that Brent trades near $110 per barrel. He explained that traders expect Iran to choke the Strait of Hormuz until April 20, followed by a reopening driven by a US or Israeli initiative. However, Schieldrop predicts Brent will trade lower heading into the weekend. He pointed out that traders fear less damage to oil and gas infrastructure now that Trump disciplined Israel.
The war approaches the end of its third week, driving Brent up almost 50% this month alone. Top OPEC producers had to cut their output deeply because ships simply cannot move through the closed strait. In contrast, US crude futures face a weekly decline. Traders expect the US government to release emergency oil reserves soon. Furthermore, US crude storage inventories recently reached their highest level since mid-2024. These factors widened the discount of US crude to Brent to about $13 a barrel.
Despite the drop in US crude futures, everyday Americans feel the pain at the pump. Gasoline and diesel prices hit multi-year highs across the country. This surge creates a massive problem for the economy and worries voters as midterm elections approach. To ease the pressure, the White House confirmed it will not ban US exports of oil and gas. A Trump administration official announced this decision on Thursday after Vice President JD Vance met with major oil executives, who warned that an export ban would only hurt domestic producers.
The military conflict shows no signs of ending soon. The Islamic Revolutionary Guard Corps announced it maintains the ability to produce missiles. Drone attacks recently forced Kuwait to shut down multiple units at its Al Ahmadi refinery. At the same time, Saudi Arabia intercepted several incoming missiles. The US also launched a strike on Kharg Island, Iran’s main export hub, but analysts say this failed to change Tehran’s strategy.
President Trump tried to downplay the extreme surge in oil markets. During an appearance with Japan’s prime minister on Thursday, Trump stated he thought the situation could be much worse. He told reporters the crisis will end pretty soon. However, Trump took a harsher tone on Friday, criticizing NATO allies. He called them cowards and accused them of refusing to help reopen the Strait of Hormuz.
The economic damage stretches far beyond just oil. European natural gas futures almost doubled their pre-war levels. Treasury Secretary Scott Bessent suggested the Iranian regime will likely collapse internally. Bessent also revealed the US wants to remove sanctions on Iranian oil to help lower surging energy costs.
Overall, the International Energy Agency reports this conflict caused the biggest supply disruption in the history of the global oil market, forcing producers to shut down roughly 10 million barrels of daily output. Officials in Saudi Arabia warn that if the disruptions last until the end of April, oil prices could skyrocket past $180 a barrel.
