Oil Prices Soar on Renewed US-Iran Hostilities and Supply Disruptions

Oil prices surged on Friday, ending the week higher after renewed US-Iran hostilities and disruptions to supply routes in the Middle East. Brent crude futures settled at $92.68 a barrel, up 0.8%, while West Texas Intermediate crude finished at $91.48 a barrel, up 0.2%. The rally was driven by fears of global economic growth slowing down due to rising inflation and government borrowing costs.

The average US diesel price hit a record high of $5.85 per gallon, with the potential for further increases as agricultural states prepare for harvesting and planting seasons. Diesel is a primary fuel for equipment in these industries, and its equivalent futures contract, heating oil, has also surged ahead of winter. Citi raised its Brent crude price forecast for Q3 to $86 a barrel from $80, citing the reopening of the Strait of Hormuz taking longer than expected.

Analysts at ANZ predicted a short-term Brent crude price of $95 a barrel with upside risk if the Middle East conflict intensifies. The US government stated that oil flows have returned to near normal levels, but tanker trackers indicate significant disruptions remain. Oil prices are currently influenced by a 'risk premium' due to ongoing hostilities in the region.