Oil Prices Soar as US-Iran Conflict Escalates, Diesel Hits Record High

Oil prices are on track to end the week with gains exceeding 6%, as the US and Iran resume military exchanges in their ongoing conflict. Brent crude futures have risen by 6.1% this week, while U.S. West Texas Intermediate crude futures have gained 8.3%. However, both contracts declined slightly on Friday, with Brent down 0.79% at $94.77 a barrel and WTI down 1.04% at $90.35.

The increase in oil prices has been accompanied by an even steeper rise in fuel prices, pushing inflation and government borrowing costs higher globally. Analysts warn that the global economy may be heading for a hard landing due to these developments.

Despite the US government's claim that Middle Eastern oil flows have returned to near-normal levels, analysts and tanker trackers report that flows remain seriously disrupted. The recent clashes between the US and Iran have added to supply disruptions, with U.S. attacks killing and wounding dozens, including Iranian civilians.

Citi has raised its average Brent crude price forecast for the third quarter to $86 a barrel from $80, citing the reopening of the Strait of Hormuz as taking longer than expected. ANZ analysts have also increased their Brent crude forecast to $95 a barrel in the short term, with upside risk if the Middle East conflict intensifies.

U.S. diesel prices have hit a record high, averaging above 10% higher than the previous week's average. This has intensified warnings of inflation and government borrowing costs rising globally.