Oil Prices Surge as Middle East Conflict Halts Most Strait of Hormuz Traffic

U.S. crude oil posted its largest weekly gain in futures trading history this week, driven by an escalating war in the Middle East that has severely disrupted global fuel supplies. West Texas Intermediate futures surged 12.2 percent to close at $90.90 per barrel, marking a massive 35.6 percent weekly increase — the largest since the contract’s inception in 1983. The global benchmark Brent rose by 8.5 percent on Friday to settle at $92.69 per barrel, bringing the week’s increase to 28 percent, its biggest since April 2020. The price shocks are already reaching consumers, with the average price for a gallon of regular gasoline in America jumping nearly 32 cents over the past week.AAA data shows the average cost for a gallon of regular gas to be $3.41. A week ago it was $2.98, and a month ago it was $2.89. Diesel is averaging $4.51 a gallon, up from $3.64 a month ago and $3.10 a year ago, suggesting that trucking costs could boost prices across the nation.The catalyst for the surge is the armed conflict between America and Iran, which has brought maritime traffic in the Strait of Hormuz — a route responsible for 20 percent of the world’s daily crude passage — to a near standstill.President Trump on Friday demanded unconditional surrender from Iran, sparking fears of a prolonged disruption. During a Thursday press conference, Defense Secretary Pete Hegseth made the administration’s stance clear, declaring the United States had “only just begun to fight.”“Iran is hoping that we cannot sustain this, which is a really bad miscalculation,” Mr. Hegseth told reporters.As tankers avoid the Strait, Gulf nations are rapidly running out of storage capacity. Iraq has already shut down 1.5 million barrels per day of production, and Kuwait has initiated production cuts.Qatar’s energy minister, Saad al-Kaabi, warned that the closure could “bring down the economies of the world,” and that prices could reach $150 per barrel in the coming weeks.“Everybody that has not called for force majeure we expect will do so in the next few days if this continues,” Mr. Kaabi told the Financial Times. “All exporters in the Gulf region will have to call force majeure. If they don’t, they are at some point going to pay the liability for that legally, and that’s their choice.”Force majeure (French for “superior force”) is a contractual clause freeing parties from liability or obligation when extraordinary, uncontrollable events — such as war, pandemics, or natural disasters — occur. Some suggested the situation could get worse. Rory Johnston, an oil analyst, posted on X: “Crude WILL go to $200 [a barrel], en route higher, unless traffic through the Strait resumes. Not clickbait, but rather brutal physics and necessary economic incentives.”In an attempt to calm the markets, the White House announced a $20 billion insurance program for oil tankers in the Persian Gulf and temporarily eased sanctions on India’s purchase of Russian oil.The White House press secretary, Karoline Leavitt, also projected confidence. “President Trump’s entire energy team, from the White House to the National Energy Dominance Council to Secretaries Wright and Bessent, has a game plan to keep oil prices stable throughout Operation Epic Fury,” Ms. Leavitt said.Energy Secretary Chris Wright reassured the public that the crisis would be short-lived, despite acknowledging that prices are higher than the administration would like “It’s weeks, I would say, in the worst case,” Mr. Wright told Fox News. “It’s weeks, not months.”Mr. Wright conceded that physical danger remains the primary hurdle. “Right now, the biggest issue is just physical security,” he said. “You don’t want to run a large tanker ship through the Strait of Hormuz today, but that’ll change in the not-too-distant future.” He added that the military plans to provide naval escorts: “First we’ve got to get their ability to cause trouble way down, and then as soon as it’s reasonable to do it, we’ll escort ships through the straits and get the energy moving again.”

Oil Prices Surge as Middle East Conflict Halts Most Strait of Hormuz Traffic

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