Oil prices retreated nearly 3% on Friday as traders locked in profits following the previous session's sharp rally, but crude benchmarks remain poised for their strongest weekly gains in months. The pullback comes amid persistent geopolitical risks in the Middle East that continue to stoke concerns over global energy supply chains.
Brent crude futures fell approximately $3, or 2.93%, to $97.72 per barrel, after settling above the $100 mark on Thursday for the first time since May. U.S. West Texas Intermediate (WTI) crude dropped $2.31, or 2.52%, to $89.87 per barrel. Despite Friday's decline, Brent is on course for a weekly advance of roughly 10%, while WTI is set to gain about 8.9%, extending a rally driven by fears of supply disruptions in key global shipping routes.
Middle East Conflict Keeps Supply Concerns Elevated
Oil markets remain fixated on the escalating conflict involving the United States, Israel, and Iran, with hostilities showing little sign of abating. The U.S. military reported completing a 13th consecutive wave of strikes against Iranian targets early Friday, focusing on drone storage sites and coastal surveillance positions aimed at reducing Tehran's ability to threaten commercial shipping through the Strait of Hormuz.
The situation intensified after Iran-aligned Houthis claimed responsibility for attacks on two Saudi oil tankers in the Red Sea, raising fears that disruption could spread beyond the Strait of Hormuz to the Bab el-Mandeb Strait—another critical chokepoint for global energy shipments. U.S. President Donald Trump warned of "major military punishment" against Iran and the Houthis following the attacks.
Meanwhile, The New York Times reported that Iran rejected a U.S.-backed ceasefire proposal delivered through Iraqi Prime Minister Ali al-Zaidi, stating Tehran would not accept a temporary agreement that left unresolved control of the Strait of Hormuz. According to the report, this was the only ceasefire offer currently under consideration. Analysts at Deutsche Bank noted in a research note that "the most obvious impact of the escalation could be seen in energy prices."
Shipping Data Offers Mixed Picture
Despite heightened geopolitical risks, shipping activity suggests that key maritime routes remain partially operational. Preliminary data from Kpler showed vessel traffic through the Strait of Hormuz held steady at three daily transits over the past three days, with two additional vessels entering the Gulf on Thursday. Activity through the Bab el-Mandeb Strait also increased, with 32 commodity vessel crossings recorded on July 23, compared with 26 the previous day.
"In the right seas, ships are still moving... so it's not a complete blockade as some might have feared," said Giovanni Staunovo, an analyst at UBS. However, analysts caution that prolonged disruptions could significantly lift crude prices. JPMorgan analysts stated in a note that "each additional month of disruption to oil supply would add around $7 to $8 a barrel to Brent," potentially pushing monthly average prices to about $114 per barrel if disruptions persist for three months.
For broader context on energy market dynamics, readers may refer to our analysis of Brent Crude Dips Below $100 but 14% Weekly Surge Signals Persistent Supply Risks.
Additional Supply Risks Remain in Focus
Beyond the Middle East, traders continue to monitor supply risks from Eastern Europe. Russia reported that its forces struck infrastructure at three Ukrainian ports overnight, including loading and unloading facilities and fuel reserves used to support Ukraine's military. Separately, Kazakhstan's energy ministry said oil companies had temporarily reduced production after suspected Ukrainian drone attacks forced the country's primary Black Sea oil export terminal to close.
These developments add to a complex supply picture that has kept energy markets on edge. For investors tracking related commodity movements, see our coverage of Wheat Prices Surge 20% as Russia-Ukraine Conflict and Supply Fears Intensify.
In the broader markets, energy sector gains have helped offset losses in other areas, as highlighted in our report on the FTSE 100 Flat as Energy Gains Offset Mining Losses; ECB Decision Awaited.
This article is for informational purposes only and does not constitute financial advice.
