Oil prices rise as Strait of Hormuz reopening optimism fades

As of 20:33 ET (00:33 GMT), Brent Oil Futures expiring in October rose 1.4% to $83.65 per barrel, while West Texas Intermediate (WTI) crude futures climbed 1.3% to $78.26 per barrel. In the previous session, Brent and WTI futures had already advanced nearly 4% and 3%, respectively, although both benchmarks remained set for weekly declines exceeding 7%.

Strait of Hormuz tensions drive renewed price gains

Oil’s latest advance followed media reports that an Iranian parliamentary committee was reviewing legislation to prohibit U.S. and Israeli ships from transiting the Strait of Hormuz. The proposed measures also include potential penalties of up to 20% of cargo value for violators.

In addition, Iran's Islamic Revolutionary Guard Corps stated it had struck “hostile targets” in the Strait of Hormuz. These developments reversed earlier market sentiment from earlier in the week, when crude prices had retreated on hopes that Tehran and Oman were close to finalising an agreement to restore shipping through the waterway.

Those earlier expectations have weakened after indications that any reopening might exclude U.S. and Israeli vessels. The Strait of Hormuz handles roughly a fifth of global oil and liquefied natural gas shipments, making any restrictions on traffic a key concern for energy markets.

Broader regional risks and macroeconomic backdrop

Further supporting prices, fighting intensified elsewhere in the region. Yemen's Iran-aligned Houthis claimed attacks on Saudi military positions and infrastructure, raising concerns over the security of Red Sea shipping routes.

Separately, a Ukrainian drone strike reportedly set a major Russian refinery ablaze, adding to supply worries. These incidents contributed to a risk premium across energy markets already sensitive to disruptions in key production and transit hubs.

Beyond geopolitical factors, investors were also focused on the upcoming U.S. nonfarm payrolls report due later on Friday for indications on the Federal Reserve’s interest rate path. Higher interest rates are generally associated with slower economic activity and potentially weaker fuel demand, providing a counterweight to the supply-side concerns currently supporting crude prices.

FAQ

Why did oil prices rise in Asian trading on Friday?
Oil prices rose due to fading optimism over a full reopening of the Strait of Hormuz and renewed concerns that Iran could restrict U.S. and Israeli-linked vessels, alongside other regional security incidents affecting energy supply routes.

How much did Brent and WTI futures gain, and where do weekly trends stand?
As of 20:33 ET (00:33 GMT), October Brent futures were up 1.4% to $83.65 per barrel and WTI futures were up 1.3% to $78.26 per barrel. Despite recent daily gains, both benchmarks were still set for weekly losses exceeding 7%.

Why is the Strait of Hormuz important for energy markets?
The Strait of Hormuz handles roughly one-fifth of global oil and liquefied natural gas shipments, so any restrictions or disruptions to traffic through this chokepoint can significantly affect global energy supply and pricing.

What other factors are influencing oil prices besides Middle East tensions?
Oil prices are also being influenced by macroeconomic considerations, particularly expectations around the U.S. nonfarm payrolls report and the Federal Reserve’s interest rate decisions, which can impact economic activity and fuel demand.