Key Takeaways
- Brent crude reached $109.97 per barrel this week, marking its peak since the beginning of May, before moderating to approximately $107.86
- Military confrontations between American and Iranian forces near the Strait of Hormuz represented some of the most severe shipping attacks in recent months
- Diplomatic representatives from Iran and Gulf nations are scheduled to convene in Oman on Monday to negotiate a potential Hormuz shipping agreement
- Houthi forces in Yemen captured the coastal city of Mokha, strengthening their control over Red Sea maritime routes
- Both Brent and WTI contracts registered gains exceeding 11% over the week, representing the most significant weekly rally since the middle of July
The oil market experienced significant turbulence this week, oscillating between dramatic increases and a Friday retreat following indications that Iranian and Gulf nation representatives might be nearing a Hormuz shipping compromise.
Brent crude climbed to a peak of $109.97 per barrel, representing its strongest position since the start of May. West Texas Intermediate similarly breached the $103 threshold during the week. Weekly performance for both benchmark contracts showed increases ranging from 11% to 13%, marking the most substantial weekly advance since the middle of July.
Come Friday, Brent had retreated to approximately $107.86 while WTI settled at $102.28, following a Financial Times report indicating that foreign ministers from Gulf states intend to meet with Iran’s chief diplomat on Monday in Salalah, Oman.
This gathering represents an Omani-led diplomatic effort and would constitute the first face-to-face negotiations between Gulf and Iranian representatives since the commencement of the U.S.-Israeli campaign against Iran in late February. Tehran and Muscat had previously indicated in August that preliminary conversations regarding a commercial shipping arrangement for Hormuz were underway.
The United States has predominantly resisted such diplomatic initiatives and has previously cautioned Gulf nations against entering into negotiations with Iran. Washington has continued to enforce its naval blockade against Iranian interests throughout the ongoing conflict.
Naval Confrontations in Hormuz Push Markets Upward
During the early part of the week, crude prices surged beyond the $100 threshold after Iranian authorities reported attacking 10 vessels in the vicinity of the Strait of Hormuz. American forces indicated they responded by destroying five Iranian tankers. This exchange represented one of the most intense periods of combat in recent months.
Commodity strategists at ING noted in their analysis that crude markets are “repricing both the duration and severity of the conflict,” emphasizing that shipping volumes passing through the Strait of Hormuz continue to operate “well below pre-war levels.”
Market analyst Tony Sycamore from IG stated that given Iran’s demonstrated willingness to prolong the confrontation, the probability of WTI crude retesting its early March peak of $119.48 is growing increasingly likely.
Yemen’s Houthis Expand Red Sea Control
Compounding supply anxieties, Houthi forces in Yemen took control of the Red Sea port city of Mokha. The United Nations Special Envoy for Yemen informed the Security Council this week that this development provides the Houthis with “a direct presence on the approaches to one of the world’s most vital straits.”
Houthi militants have announced a naval blockade targeting Saudi Arabia and have conducted attacks on vessels transiting the Bab el-Mandeb Strait. On Friday, news outlets reported that the organization targeted Saudi Arabia’s East-West petroleum pipeline, with six significant fires documented at the installation.
The Bab el-Mandeb Strait represents another critical corridor for international oil transportation. Interruptions there, combined with diminished throughput via Hormuz, create additional strain on petroleum markets.
President Donald Trump of the United States stated his expectation that hostilities will conclude following the November midterm elections. Nevertheless, a Wall Street Journal analysis suggested that senior White House officials anticipate the conflict could persist into early 2029.
Monday’s diplomatic session in Oman will receive intense scrutiny from energy traders as a potentially pivotal initial move toward reducing tensions throughout the Gulf region.
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