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Oil Set for Weekly Surge as Mideast War Heads Toward Fourth Week

(Bloomberg) — Oil headed for another weekly gain as the war in the Middle East dragged on, with the Strait of Hormuz all-but-closed, strikes continuing across the region, and analysts warning the crisis may deepen.

Brent (BZ=F) traded above a $108 barrel, up more than 5% this week, after closing on Thursday at the highest since mid-2022. West Texas Intermediate (CL=F) for May was around $94. In the region, the Islamic Revolutionary Guard Corps said it was still able to produce missiles, the semi-official Fars news agency reported. Elsewhere, Kuwait shut down severa units at Al Ahmadi Refinery following drone attacks, and Saudi Arabia intercepted missiles.

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Brent has gained almost 50% this month, outpacing advances in US benchmark WTI, with the US and Israeli war against Iran approaching the end of its third week. The conflict has triggered near-complete closure of the Strait of Hormuz, hampering supplies. The weekly gain came despite President Donald Trump saying he’s “not putting troops anywhere,” after being asked about deploying ground forces, while Prime Minister Benjamin Netanyahu said Israel would refrain from more attacks on Iranian energy facilities.

The price bias from “here stays asymmetric, with Brent potentially remaining higher as long as Gulf infrastructure and Hormuz risks are still live,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore. “WTI could be choppier and more capped.”

On Thursday, Trump tried to downplay the surge in oil during an appearance with Japan’s prime minister. “I thought there was a chance it could be much worse,” he said. “It’s not bad, and it’s going to be over with pretty soon.”

US efforts to tame prices, including the release of strategic reserves that must be returned with interest at a later date, have widened the discount of WTI to Brent to about $14 a barrel. That’s set up an unusual situation where Brent is set for a weekly gain, while WTI is on a path to drop more than 4%.

In other energy markets, European natural-gas futures surged to almost double their pre-war level. Fuel prices also climbed, underscoring the wider inflationary risks from the conflict, with central bankers warning that the conflict carries the risks of tighter monetary policy.

Israel’s Netanyahu told reporters Thursday the country acted on its own when its jets bombed Iran’s giant South Pars gas field a day earlier, but it would hold off from more strikes on energy. He declined to give a timeline on ending the conflict, but said he could “see this war ending a lot faster than people think.”

Meanwhile, Treasury Secretary Scott Bessent said it’s likely Iran’s regime will probably collapse within itself. He also said the US is looking to remove sanctions on Iranian oil in an effort to lower surging energy prices triggered by the war in the Gulf, and could also look at a unilateral release of national reserves.

The White House also doesn’t plan to ban the export of oil and gas, a Trump administration official said Thursday, following a meeting between Vice President JD Vance and oil executives. The industry had warned such a move would only hurt producers.

The conflict has inflicted the biggest supply disruption in the history of the global oil market, forcing producers around the Gulf to collectively shutter roughly 10 million barrels of daily output, according to the International Energy Agency.

Saudi Arabia, the biggest crude exporter, has a base case that sees prices soar past $180 a barrel if the disruptions last until end-April, the Wall Street Journal reported, citing unidentified officials.

The energy crisis continues to deepen, as “nothing points to a limited engagement at this juncture,” according to RBC Capital Markets LLC. Tehran is still “effectively in control of the Strait of Hormuz,” with the US strike on Kharg Island, its main export hub, failing to change its calculus, analysts including Helima Croft said in a note.

—With assistance from Charles Gorrivan.