Oil prices closed higher this week following renewed US-Iran hostilities
Oil prices rose on Friday, closing the week on a significant note after the US-Iran conflict resumed for the seventh month. Diesel prices in the US hit all-time highs as the fighting intensified and supply shortages worsened.
Brent crude futures closed up 76 cents, or 0.8%, at $92.68 a barrel. WTI crude futures closed up 18 cents, or 0.20%, at $91.48 a barrel.
Brent crude rose 7.6% this week, while WTI crude gained roughly 10% as supply routes from the Middle East were disrupted by the war.
The rise in oil prices, coupled with a much steeper increase in fuel prices, has driven up inflation and government borrowing costs globally, intensifying fears that global economic growth could slow unless there is some easing of tensions.
All sectors of the economy are affected by diesel. One reason for such high US government bond yields is the expectation that inflation will continue to rise.
Renewed US-Iran conflict and Ukraine's attacks on Russian refineries have increased supply disruptions, driving average diesel prices in the US to record highs. The average price of a gallon of diesel in the US is currently $5.85.
Diesel is a staple fuel for agricultural equipment. Prices could rise further due to sharp declines in inventories and the start of harvest and planting seasons in various agricultural states across the country. Heating oil, the equivalent futures contract, has also seen an increase as winter approaches.
The US economy eased fears of weakness in the labor market in August, but strengthened the argument for a Federal Reserve rate hike in late September.
Strong employment figures signal a Federal Reserve rate hike, putting pressure on WTI.
Although the US government says Middle East oil flows have returned to near-normal levels in recent weeks, analysts and tanker trackers say flows are severely disrupted.
Preliminary data shows that only four commodity ships passed through the Strait of Hormuz on Thursday; well below the 10-day average of around 15.
This week's US-led attacks, which killed and wounded dozens of people, including Iranian civilians, were the most violent clashes between the two countries since July.
So far, this week's escalation has significantly impacted exports from the Middle East, but there is no indication that it has tightened the oil market. The current rise in oil prices appears to be largely driven by sentiment and fear.
Iraqi energy officials announced on Wednesday that Iraq's August oil exports increased to approximately 2.34 million barrels per day from around 1.35 million barrels per day in July.
Related Articles
Oil prices are poised for a weekly rise as tensions intensify
Oil prices edged lower as the uncertainty surrounding renewed military clashes
Oil prices continued to rise following US and Iranian attacks on ships serving their respective purposes
