Oil prices are heading for their first weekly close above USD 100 a barrel since mid May as attacks around key Middle Eastern shipping routes raise fears that supply disruptions could last.
Brent crude was trading above USD 105 a barrel on Friday after briefly reaching nearly USD 110, while US West Texas Intermediate remained above USD 100. Both benchmarks were on course for weekly gains of more than 10 per cent, their strongest performance since July.
The pressure is coming from two strategically important waterways. Traffic through the Strait of Hormuz has fallen sharply as the United States and Iran exchange attacks. On Thursday, only seven vessels passed through the strait, compared with a 10 day average of 15 and roughly 125 large commercial vessels a day before the war began.
At the other end of the region, Iran aligned Houthi forces seized Yemen's port of Mocha and advanced along the Red Sea coast, raising further concerns over shipping through the Bab el Mandeb. Attacks on Saudi energy facilities have added another layer of risk to regional supplies.
The impact is already moving beyond crude markets. US national average diesel prices crossed six dollars a gallon for the first time on Thursday, while rising energy costs have intensified concerns about inflation and higher interest rates. US Treasury yields have moved towards 5 per cent as markets increasingly price in the possibility of further monetary tightening.
For oil importing economies, the pressure could spread through transport, electricity, industry and household fuel costs if elevated prices persist. In Pakistan, where domestic fuel prices are closely exposed to international crude movements, a prolonged rally could add pressure to inflation and the country's import bill.
Yet demand is also becoming a counterweight. OPEC has cut its forecast for global oil demand growth in 2026 for the fifth consecutive time, while its August output also declined, according to Reuters. China, the world's largest crude importer, will be particularly important in determining whether the rally continues.
The immediate risk is therefore not simply oil crossing USD 100. It is whether disrupted shipping becomes the new normal. If physical supplies remain constrained, the current price surge could become a wider inflation problem rather than a temporary market reaction.
