Oil prices have seen a sharp rise this week, with Brent reaching its highest level since last July on Friday, trading near $94, marking its second consecutive weekly gain with a weekly increase of over five percent. WTI is trading in the $86-87 range, indicating that both benchmarks are coinciding with one of the most tense periods of the year.

The main driving force behind this rise is the lack of signs of easing in the US-Iran conflict. The two sides are still in an unresolved dispute over control of the Strait of Hormuz, and this conflict continues to disrupt energy flows to the Middle East. US Treasury Secretary Scott Bessent announced that details of Washington's new measures to isolate the Iranian economy will be revealed next Monday, an initiative that Trump has dubbed "economic D-Day." These measures could also affect countries that still buy oil from Iran, primarily China, which Beijing rejects such economic pressure and calls for a diplomatic solution.

Concerns about oil supply aren't coming from a single front. Disruptions in Russia's energy sector are a separate factor supporting prices, while Ukraine's attacks on Russian refineries and ports are impacting fuel production, creating supply shortages in some regions. This shows that geopolitical risk from the Middle East isn't the only vulnerability in the global energy market; two separate conflict zones are simultaneously putting pressure on the supply side.

Efforts by Gulf producers to reduce their reliance on the Strait of Hormuz continue, but even these efforts demonstrate the difficulties they face. Saudi Arabia's recent route change has become so circuitous that it looks almost "absurd" on the map, with crude oil being transported west to Yanbu port and then north, highlighting how inefficient and expensive alternative routes have become in practice. US Energy Secretary Chris Wright noted that oil exports from the Middle East have recovered to fifteen million barrels per day, but this figure is still below pre-conflict levels.

Despite this picture, it would be inaccurate to paint a completely one-sided image, as prices have experienced similar sharp movements in recent weeks. At one point, September WTI futures contracts fell by more than ten percent on a weekly basis, dropping to $78, a period marked by temporary optimism regarding US-Iran negotiations. In short, the market remains in a truly volatile state, reacting sharply downwards to every new piece of negotiation news and sharply upwards to every new attack or continued blockade announcement.

For those following oil and Middle East-related risk assets through Gate, the key point to watch is the details of the new US sanctions package on Iran, to be announced on Monday. The extent to which this package targets major buyers like China will be the most concrete development directly impacting both whether oil prices will remain permanently above $90 and global inflation and Fed interest rate expectations.

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