Oil prices edged higher on Friday, but the market remained on track for its first weekly decline since early February, as traders balanced tentative signs of de-escalation against the deeper reality of a prolonged supply shock tied to the Iran conflict.
Brent crude rose $1.87, or 1.73%, to $109.88 a barrel, while U.S. West Texas Intermediate (WTI) gained $1.57, or 1.66%, to $96.05. The gains offered only partial relief after a week of consolidation, with Brent down 2.1% and WTI off 2.3% over the period.
The weekly dip follows an extraordinary run-up. Since the outbreak of hostilities in late February, Brent has surged more than 50%, while WTI has climbed over 40%, reflecting a market that has aggressively priced in geopolitical risk and the threat of sustained supply disruption.
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Attention remains fixed on policy signals from Donald Trump, whose decision to extend a pause in attacks on Iran’s energy infrastructure has cooled immediate fears of further escalation. That restraint has given traders an opportunity to take profits, but few are interpreting it as a definitive shift toward de-escalation.
Instead, the market is increasingly trading on the assumption that the conflict will endure. Washington has set an April 6 deadline for Iran to reopen the Strait of Hormuz, one of the world’s most critical oil transit routes, while simultaneously reinforcing its military presence in the region. The possibility of direct action against key Iranian export infrastructure, including Kharg Island, continues to hang over the market.
The scale of disruption already priced into crude is substantial. Roughly 11 million barrels per day have been taken out of global supply, according to industry estimates — a shock the International Energy Agency has characterized as more severe than the oil crises of the 1970s.
Flows through the Strait of Hormuz remain constrained, effectively removing a significant portion of Middle Eastern exports from the market. That tightening is beginning to ripple through physical markets, with refiners facing higher input costs and longer delivery times, particularly in Asia, where dependence on Gulf crude is most acute.
“Every additional day of restricted flows compounds the deficit,” UBS analyst Giovanni Staunovo noted, highlighting that more than 10 million barrels per day remain disrupted.
The result is a market that is tightening not just on paper but in physical availability, with spot premiums widening in key trading hubs.
The response from consuming nations is becoming more visible. Strategic reserves are being tapped, particularly across Asia, while some economies are beginning to adjust demand expectations. Mukesh Sahdev of consultancy XAnalysts said the longer the conflict persists, the greater the likelihood of structural demand responses, including reduced industrial consumption and shifts toward alternative fuels.
At the same time, the market is grappling with divergent issues. Analysts at Macquarie Group argue that a near-term easing of hostilities could trigger a sharp correction in prices, though not a full return to pre-conflict levels, given residual risk. In contrast, a prolonged conflict stretching into mid-year could push crude toward $200 a barrel — a level that would amplify inflationary pressures globally and complicate central bank policy.
The broader macroeconomic implications are already coming into focus. Elevated oil prices risk feeding into transport and manufacturing costs, potentially reversing recent gains in inflation control across major economies. For emerging markets, particularly energy importers, the shock threatens to widen trade deficits and put pressure on currencies.
Yet for all the volatility, the market’s underlying posture remains defensive. Traders are unwinding some positions after a steep rally, but few are willing to step away entirely, given the asymmetry of risk — where downside appears limited in the short term, but upside could be abrupt and severe if the conflict escalates.
The weekly decline is currently seen as a pause driven by tactical repositioning rather than a shift in fundamentals. The dominant forces shaping the market, constrained supply, geopolitical uncertainty, and fragile transit routes, remain firmly in place. In that context, oil is no longer reacting solely to events on the ground, but to the duration and potential expansion of the conflict itself.