(Bloomberg) — Oil extended its powerful rally above $100 a barrel following an escalation of hostilities in the Middle East that has stoked fears of deeper supply disruptions.
West Texas Intermediate traded near $104 a barrel after surging almost 7% in the previous session, with futures on track for the biggest weekly advance since July. Brent crude settled near $108, the highest level in nearly four months. Iran and the US are digging in for a protracted conflict, with little sign of a near-term ceasefire or return to normal Middle East energy flows.
Fighting has intensified over the past two weeks, including US strikes on Iranian oil tankers, ballistic missile attacks on Jordan and Houthi assaults on Saudi energy facilities that have forced some operations to halt. A recent pickup in crude purchases by China has also tightened the oil market.
“Further attacks on fuel tankers and rhetoric suggest the conflict could extend longer than analysts had modeled,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. “Trader chatter remains skeptical of the rally, but the reality is that both the expected timeline of the conflict and hopes for a significant normalization in Gulf flows are being pushed out.”
Some oil continues to leave the Persian Gulf, often aboard tankers sailing with their transponders switched off to evade detection, though vessels still face the constant threat of attack. The UK Maritime Trade Operations received a report that two ships were struck by unidentified projectiles west of Khasab, Oman, on Sept. 10, highlighting the continuing dangers to shipping.
The US is seeking to cripple Iran’s economy, and Treasury Secretary Scott Bessent said a “large bank” will be sanctioned on Monday as part of the campaign, which includes a naval blockade. An Iranian official recently acknowledged growing economic pain, but said Tehran must keep fighting until it is confident Washington won’t strike again.
Iran has been able to rebuild its missile capabilities and will escalate strikes on US and Gulf assets if Washington intensifies its own attacks, a senior Iranian official said. White House advisers including Vice President JD Vance have told President Donald Trump that the war could drag on through the remainder of his term, which runs until January 2029, the Wall Street Journal reported.
Brent crude is up almost 80% this year, although the benchmark remains below its wartime peak of just above $126 a barrel reached in April. European natural gas prices have also rallied, while refined products such as diesel have posted even steeper gains, compounded by the Russia-Ukraine war.
Before the Iran war, about a fifth of oil and liquefied natural gas flowed through the Strait of Hormuz to global customers. Saudi Arabia warned its oil production plunged again last month, hitting the lowest since 1990.
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