Oil Prices Surge 16% in Week as Red Sea Closure Threats Fuel Supply Concerns

Oil prices jumped more than 4% on Friday, reaching their highest levels in more than a month as escalating military tensions between the United States and Iran intensified concerns over global energy supplies and maritime security.

The rally pushed crude prices sharply higher for the week, with both major benchmarks gaining nearly 16% as traders priced in the growing risk of supply disruptions linked to instability in the Gulf region and potential threats to shipping routes through the Red Sea.

Brent crude futures rose $3.87, or 4.59%, to settle at $88.10 per barrel, while U.S. West Texas Intermediate (WTI) crude climbed $3.54, or 4.48%, to close at $82.49 per barrel.

Both benchmarks reached their highest levels since mid-June.

Over the course of the week, Brent posted its third consecutive weekly gain, while WTI recorded its second straight weekly increase, reflecting growing concerns over the potential impact of geopolitical risks on oil flows.

Oil markets reacted to a widening confrontation between Washington and Tehran after both sides intensified strikes against strategic targets.

The United States carried out attacks targeting bridges and an airport inside Iran, while Tehran struck a power station and desalination facility in Kuwait.

Iran also announced additional attacks against U.S. facilities across the Middle East, including its first direct strike inside Syria, following several consecutive nights of American strikes on Iranian military infrastructure.

Andrew Lipow, president of Lipow Oil Associates, said markets are responding to the rapid escalation between the two countries, particularly after this week's strikes against critical infrastructure.

"If more oil tankers come under fire or sustain damage, oil prices are likely to continue rising because shipowners may simply refuse to enter the Arabian Gulf," Lipow said.

The collapse of a temporary truce between the United States and Iran has significantly reduced oil flows through the Strait of Hormuz, one of the world's most important energy chokepoints.

Before the conflict began, roughly 20% of global oil supplies passed through the narrow waterway, making any disruption a major threat to international energy markets.

Concerns have also grown over the Red Sea after reports that Iran pressured Houthi forces to close the route if the United States targeted Iranian power infrastructure.

Tamas Varga, an analyst at PVM Oil Associates, said any disruption to Red Sea shipping would represent a significant risk, particularly as Saudi Arabia has already redirected a large portion of its crude exports through the Red Sea port of Yanbu via the East-West pipeline.

Since the start of the conflict, Saudi Arabia has redirected more than 70% of its usual daily crude exports to Yanbu, avoiding reliance on the Strait of Hormuz.

Recent shipments through the Red Sea port have averaged around 4 million barrels per day, compared with approximately 973,000 barrels per day during the same period last year.