Oil prices surge past $107 as Hormuz tensions keep supply fears elevated

Crude oil prices continued their upward momentum on Friday, with Brent trading above $107 per barrel and WTI nearing $98 per barrel, as ongoing tensions around the Strait of Hormuz and fresh military signals from Iran kept markets on edge. The latest gains follow a strong rally in the previous session, where both benchmarks posted sharp increases, putting them on track for one of their biggest weekly rises since the conflict began.

The recent price strength has been driven by reports of increased Iranian naval activity in the region, air defence movements near Tehran, and lingering uncertainty over diplomatic progress. The price gap between Brent and WTI widened again, reflecting heightened global concerns over supply disruptions from the Gulf.

Major supply still offline

Market estimates indicate that a significant portion of pre-conflict oil output from the region remains shut in. A large share of this disruption is not due to direct damage but rather precautionary production cuts, limited tanker movement, and logistical bottlenecks caused by restricted traffic through the Strait of Hormuz.

While some recovery in production is expected if conditions stabilize, analysts warn that prolonged shutdowns could delay a full return to normal levels. Additionally, reduced availability of tankers in the region is limiting how quickly exports can resume even if the situation improves.

Weekly rally driven by geopolitical risk

Crude prices have recorded strong weekly gains, supported by a renewed geopolitical risk premium. Earlier expectations of easing tensions have weakened, especially after reports of increased military readiness and actions in the region. Recent visuals showing control over shipping lanes have further reinforced concerns about potential disruptions.

US output may respond to higher prices

Higher oil prices are also prompting a potential response from US producers. Industry surveys suggest that a portion of companies are considering increasing production if prices remain elevated. However, many still expect that Gulf supply will eventually return, though shipping and logistics costs are likely to stay higher for an extended period.

Market watches diplomacy closely

Despite ongoing signals of possible negotiations, there is no clear timeline for a lasting resolution. Market participants remain cautious, viewing the current diplomatic phase as uncertain. Any lack of progress in talks could push prices even higher, as the market remains highly sensitive to developments in the Strait of Hormuz.

Overall, crude oil continues to react sharply to geopolitical signals, with even minor disruptions in the region having a significant impact on global pricing.

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