Oil Prices Surge on Renewed US-Iran Tensions and Record Diesel Prices

Oil prices surged to end the week higher due to renewed US-Iran military exchanges and supply disruptions in the Middle East. Brent crude futures settled at $92.68 a barrel, up 76 cents or 0.8%, while West Texas Intermediate crude finished at $91.48 a barrel, up 18 cents or 0.20%. The rally in oil prices pushed inflation and government borrowing costs higher worldwide.

Average US diesel prices hit record highs of $5.85 per gallon due to the conflict and Ukrainian attacks on Russian refineries. Claudio Galimberti, chief economist at Rystad Energy, said 'All sectors of the economy are affected by diesel. This is one of the reasons why the government bond yields in the United States are so high, it's the expectation that inflation will continue to go up.'

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