Week in Review – Oil Up 25% on Iran Conflict, Highest Since 2024

Oil prices continued their sharp rally this week as geopolitical tensions in the Middle East intensified and disruptions to critical energy routes raised concerns about global supply. Prompt West Texas Intermediate (WTI) futures traded more than $5.20 per barrel higher Friday morning and are on track to close the week up by more than $15 per barrel. The move pushed WTI above $85 per barrel for the first time since April 2024, marking one of the strongest weekly gains since the extreme market swings of 2020 and Russia-Ukraine conflict in 2022.

Iranian forces launched attacks across several Gulf countries, including the United Arab Emirates, Bahrain, Qatar, and Kuwait, with one strike setting Bahrain's oil refinery on fire before authorities brought the situation under control. Iran's foreign minister also indicated that the country is not seeking a ceasefire and has no intention of negotiating, signaling that tensions could remain elevated in the near term.

Daily volatility has risen dramatically during the crisis. Compared to normal daily swings of 5-10 cents per day, daily spreads between the high and the low trading level have surged to 40 cents and beyond. Moreover, prices have consistently settled near day's high, as each day brings fresh increases to fuel prices.

The conflict has also disrupted global shipping routes. Vessel traffic through the Strait of Hormuz remains constrained, with many tankers avoiding the Persian Gulf and rerouting toward the Red Sea when possible. This waterway normally carries roughly 20% of the world's oil supply, and the current disruption has already prevented large volumes of crude from reaching global markets. The longer shipments remain constrained, the greater the pressure on oil prices.

Energy producers in the region have warned that the situation could worsen if hostilities continue. Qatar's energy minister said Gulf exporters may be forced to suspend energy exports within weeks if the conflict persists, a development that could tighten supply even further. Some analysts have suggested that prolonged disruptions in the region could push oil prices significantly higher, particularly if tanker movements remain restricted.

Political developments in Washington are also influencing market expectations. The U.S. House of Representatives rejected a War Powers resolution that sought to limit the president's authority to use military force in Iran. However, under the War Powers framework, unauthorized military actions must end within 60 days unless Congress approves them, leaving the administration facing a potential late-April deadline to seek approval.

Meanwhile, efforts to stabilize supply are emerging elsewhere in the market. The United States granted a temporary waiver allowing Indian refiners to purchase Russian crude to ease pressure on India's oil supply. Indian refiners have already secured more than 10 million barrels of Russian crude, helping offset some supply concerns as the Middle East conflict unfolds.

Developments in Europe also remain relevant to global oil flows. Ukrainian President Zelensky said the damaged Druzhba oil pipeline could potentially be repaired within 30-45 days, although he indicated he personally opposes restoring flows of Russian crude through the line. The pipeline was hit by a Russian drone in January 2027, disrupting part of the system that transports Russian crude oil to several European countries. The timeline and political decisions surrounding the pipeline could influence supply availability in European markets.

Despite the current rally, some analysts believe the surge in oil prices may prove temporary if geopolitical risks ease and regional oil flows normalize. However, with attacks spreading across major energy-producing regions and shipping routes still constrained, markets remain highly sensitive to any new developments that could further disrupt global supply.

Prices in Review

Crude prices moved higher throughout the week, with notable swings along the way. Prices started at $71.91 on Monday before climbing to $77.37 on Tuesday. The market briefly pulled back to $74.14 on Wednesday, but momentum returned on Thursday, with prices rising to $77.89. The largest move came at the end of the week, with crude surging to $87.87 on Friday, the week's highest level. Overall, crude gained $15.96 per barrel, representing an increase of about 22.2% over the course of the week.

Diesel prices also moved significantly higher during the week. Prices opened on Monday at $2.9419 and climbed to $3.2566 on Tuesday. The market eased slightly on Wednesday to $3.1872, but gains resumed on Thursday, with prices rising to $3.4106. The largest move occurred on Friday, when diesel surged to $3.700, marking the week's peak. Overall, diesel prices rose by $0.7581 per gallon during the week, or approximately 25.8%.

Gasoline prices also trended higher throughout the week with steady gains. Prices opened on Monday at $2.3920 and rose to $2.4806 on Tuesday. The pace of increases accelerated later in the week, with gasoline rising to $2.6212 on Thursday and reaching $2.7097 on Friday, the highest level of the week. From Monday to Friday, gasoline prices rose by $0.3177 per gallon, an overall increase of about 13.3%.