KEY POINTS
- Brent was on track for a 6.6 percent weekly gain and WTI 8.8 percent, its best week since July 13, as US-Iran fighting resumed.
- US diesel prices hit a record high, lifting inflation and bond yields, with analysts warning of a possible global hard landing.
- Hormuz traffic fell to four vessels on Thursday, and Citi raised its Q3 Brent forecast to $86 while ANZ set a $95 short-term call.
Oil prices headed for a weekly gain of more than 6 percent as the United States and Iran resumed military exchanges in a conflict now in its seventh month, while US diesel prices hit a record high.
The rally in crude, paired with a much steeper jump in fuel, has lifted inflation and government borrowing costs worldwide. Consequently, warnings have grown that the global economy could face a hard landing.
Diesel spike stokes inflation fears
According to Rystad Energy chief economist Claudio Galimberti, diesel touches every sector, which helps explain why US government bond yields sit so high on expectations that inflation will keep rising. Specifically, average US diesel prices set fresh records as renewed US-Iran hostilities and Ukrainian strikes on Russian refineries deepened supply disruptions.
Moreover, the flows themselves remain strained. The US government said Middle Eastern oil had returned to near-normal levels, yet analysts and tanker trackers said shipments stayed seriously disrupted. Indeed, only four commodity vessels transited the Strait of Hormuz on Thursday, well below the roughly 15 seen over the prior 10 days.
Prices ease intraday, but risk stays high
However, prices dipped slightly on the day. Brent crude fell 14 cents to 95.38 dollars a barrel by 1015 GMT, while US West Texas Intermediate slipped 37 cents to 90.93. Still, for the week Brent gained 6.6 percent and WTI 8.8 percent, its best showing since July 13.
Geopolitics kept driving the tape. According to KCM Trade analyst Tim Waterer, renewed hostilities and uncertainty around Hormuz repriced risk higher. Furthermore, Israel warned it would cripple Iran’s military and civilian infrastructure if attacked, while Iranian sources said a US export blockade was growing harder to withstand.
Supply signals stayed mixed. Additionally, Iraq lifted August exports to about 2.34 million barrels per day from 1.35 million in July. Ultimately, forecasters turned more bullish, as Citi raised its third-quarter Brent forecast to 86 dollars from 80, citing a slower Hormuz reopening, and ANZ lifted its short-term call to 95 dollars.
