Oil Prices Soar Towards $100 Amid Geopolitical Uncertainty
Despite the Strait of Hormuz reopening and US military efforts to escort commercial vessels through the waterway, oil prices remain on track to reach $100 a barrel. The Brent crude futures contract has gained 7.6% this week, its strongest weekly gain since mid-July, while West Texas Intermediate rose 10.4%. The surge in prices reflects a geopolitical premium embedded in both Brent and WTI.
The improvement in Hormuz traffic is fragile, with only around 4.9 million barrels per day moving through the strait during the second quarter, down from the pre-war average of 20 million barrels. US forces intercepted missiles and drones during their escort operation on Tuesday, but renewed Iranian attacks on US bases in Kuwait and the UAE risk undermining the recovery.
US diesel prices have also reached a record high of $5.82 per gallon, driven by low distillate stocks and disruptions to Russian refineries due to Ukrainian attacks. The market is vulnerable as it heads into the Northern Hemisphere harvest and winter heating season.