Crude oil prices are on track to post a second consecutive weekly gain as hopes for a diplomatic breakthrough in the Middle East faded after the US announced plans to impose sweeping sanctions on Iran, seeking to economically isolate Tehran and pressure it to accept Washington’s conditions.
International benchmark Brent crude futures advanced another 6% this week, with prices topping $94.71 per barrel, marking their highest level in nearly a month. If the rally is sustained through the end of the month, it would also mark the second consecutive month of gains, building on a 20.5% jump in July.
Traders are now awaiting further details of the US campaign to isolate Iran’s economy, with no apparent end in sight to a conflict that has sharply reduced Middle Eastern oil exports.
Treasury Secretary Scott Bessent said on Thursday that the administration would provide details of the initiative next Monday, after President Donald Trump described the push as an “economic D-day”.
The measures will target Tehran and could also ensnare countries that continue to deal with the Islamic Republic, potentially including China. Earlier this month, Trump said Iran was on the verge of financial collapse.
Trump’s threat to intensify economic pressure comes after months of military strikes and a full naval blockade of Iranian ports failed to force Tehran to capitulate. However, the Islamic Republic has long faced sanctions, raising questions about what additional measures Washington could take to further pressure its economy.
The US, along with Israel, launched the war on 28 February, citing several objectives, including toppling Tehran’s government and ending its nuclear programme. The conflict prompted Iran to block the Strait of Hormuz, a critical shipping route that Tehran has since used as a key source of leverage in the conflict.
The closure of the strait, through which around one-fifth of the world’s traded oil and natural gas once passed, has pushed up fuel and basic goods prices, roiling the global economy. Trump is also facing mounting pressure to end the increasingly unpopular war ahead of the US congressional elections.
Both the US and Iran have issued conflicting statements over control of the waterway. Trump last week shared an AI-generated image, claiming that it was now US territory, while Iran said that the Strait was fully under its control.
Oil-driven inflation fears push global bond yields higher
Higher oil prices have fuelled inflation concerns, while rising government spending has triggered a sharp increase in global bond yields this week. On Wednesday, the yield on the 30-year US Treasury note climbed to its highest level since 2007.
Similarly, long-dated bond yields in Germany and France had earlier risen to their highest levels in 15 and 18 years, respectively. Meanwhile, Japan’s benchmark 10-year government bond yield moved towards 3%, a three-decade high.
Against this backdrop, the US Treasury Department announced on Wednesday that it would at least double the size of its planned purchases of longer-term government debt. Treasury Secretary Scott Bessent also indicated on Thursday that the repurchase programme could be expanded further.
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