Oil Nears $96 as US-Iran Tensions Escalate—But the Real Risk May Be What Happens Next

SINGAPORE — Oil prices were holding near six-week highs on Friday as renewed fighting between the United States and Iran pushed crude toward its strongest weekly advance since mid-July, with traders increasingly focused on the risk that disruptions around the Strait of Hormuz could worsen.

Brent crude futures were around $95.52 a barrel, while U.S. West Texas Intermediate (WTI) stood near $91.36 in early trading Friday. On the week, Brent was up about 7.6%, while WTI had climbed 10.4%, putting both benchmarks on track for their strongest weekly gains since the week ending July 20.

The latest surge reflects a market increasingly worried that the renewed U.S.-Iran confrontation could further restrict oil flows through the Middle East, particularly the strategically vital Strait of Hormuz.

Hormuz Becomes the Market's Biggest Pressure Point

Shipping activity through Hormuz has remained dramatically below normal.

Preliminary Kpler data showed that only four commodity vessels crossed the Strait of Hormuz on Thursday, down from nine the previous day and far below the roughly 15-vessel 10-day average. Only two very large crude carriers had crossed the waterway during the week through the latest reporting period.

Before the conflict began, roughly 125 large commercial vessels passed through the strait each day. The waterway is one of the world's most important energy chokepoints, carrying oil and liquefied natural gas supplies serving global markets.

That makes every additional military or shipping disruption potentially significant for energy prices.

Iran has also expanded its list of vessels considered non-compliant and potentially subject to fines, confiscation or detention if they attempt to pass through the strait, while Iraqi vessels remain among those receiving permission to transit.

Conflict Is Colliding With a Shrinking Supply Cushion

The latest price rally is not occurring in isolation.

ANZ analysts have raised their short-term Brent crude forecast to $95 a barrel, warning that the market is entering a more delicate phase as inventories that helped absorb the initial supply shock begin to diminish.

The U.S. Energy Information Administration has likewise warned that severe restrictions on Hormuz shipments can push global inventories lower and keep oil prices elevated until flows normalize and stockpiles are rebuilt. Its August outlook projected Brent at an average of about $85 a barrel in the third quarter of 2026, while noting that the conflict-related disruption could take time to unwind.

The contrast is important: current market prices are already significantly above the EIA's earlier quarterly average projection, underscoring how quickly geopolitical developments can change the oil outlook.

Diesel Prices Are Sending Another Warning

The shock is also spreading beyond crude.

U.S. diesel futures recently reached a 52-month high, with prices having risen sharply over the previous 10 weeks amid disruptions affecting refineries and fuel supplies in the Middle East and Russia.

The consequences are potentially much broader than the energy market.

Diesel is critical to trucking, agriculture, shipping, construction and industrial activity. The Associated Press reported Friday that the U.S. average diesel price had reached a record $5.85 per gallon, increasing transportation costs and raising the possibility of higher prices for goods moving through supply chains.

That means a prolonged energy shock could eventually feed into consumer inflation.

Russia and Ukraine Add Another Layer of Risk

The Middle East is not the only source of pressure.

Ukraine's attacks on Russian refineries have added to concerns about global refined-fuel supplies. Russia remains a major producer, meaning prolonged disruptions to its refining infrastructure could tighten fuel markets even if crude production itself is not affected to the same degree.

At the same time, Russian President Vladimir Putin's comments suggesting that a path toward a Ukraine peace agreement remains possible have provided a counterweight to the oil rally.

Any meaningful reduction in attacks on Russian energy infrastructure could eventually help ease some supply concerns.

Iraq Provides Some Relief

There is at least one important source of additional supply.

Iraq increased its oil exports to roughly 2.34 million barrels per day in August, up from about 1.35 million bpd in July, according to Iraqi energy officials cited by Reuters.

September exports are also expected to increase, helped by discounted prices and Iranian approvals allowing Iraqi tankers to move through Hormuz.

That additional Iraqi supply could help cushion the market—but whether it will be enough depends heavily on how long the broader disruption continues.

Saudi Arabia Sends a More Complicated Signal

Another factor is coming from Saudi Arabia.

Saudi Aramco kept its October official selling price for Arab Light crude to Asian buyers unchanged at a $2-per-barrel discount to the Oman/Dubai benchmark.

Analysts cited by The Wall Street Journal said the pricing decision could indicate that physical oil-market conditions are not as tight as the futures rally might suggest.

That creates a critical divide in the market: traders are pricing geopolitical risk aggressively, while some physical-market indicators suggest actual supply conditions have not yet reached crisis levels.

The Question Now Is What Happens to Hormuz

For oil markets, the next phase could hinge less on what happened this week and more on whether shipping through Hormuz continues to deteriorate.

Reuters reported that observed oil and petroleum-product flows during the conflict have generally remained around 4 million to 6 million barrels per day, well below normal levels, while Rystad Energy expects flows to remain very low into November if the current deadlock persists.

U.S. Vice President JD Vance has said Washington does not plan to negotiate with Iran unless Tehran stops attacking commercial shipping through the strait. At the same time, Iran has tightened restrictions on vessels attempting to use the waterway.

The result is a highly fragile oil market.

If shipping gradually resumes, some of the geopolitical premium built into crude prices could unwind quickly. But if attacks intensify, tanker traffic falls further or energy infrastructure is directly targeted, oil could face another sharp upward move.

For now, the message from the market is unmistakable: crude is no longer reacting only to today's supply. It is pricing the possibility that tomorrow's supply could be much harder to move.