Oil Prices Set for Weekly Gain Over 7% Despite Friday Pullback

Oil prices eased on Friday but remained on track for a weekly gain exceeding 7%, as escalating attacks along critical Middle East shipping routes continued to fuel fears of prolonged supply disruptions. Both major benchmarks pulled back from earlier highs after reports emerged that Middle Eastern diplomats were working toward a temporary arrangement with Iran to manage shipping through the Strait of Hormuz.

Prices had surged more than 6% the previous day after Iran reported attacking multiple vessels near the strait, following earlier U.S. strikes on Iranian oil tankers. Vessel traffic through the strait dropped noticeably below its recent average, highlighting the impact of ongoing tensions in a corridor that previously handled roughly one-fifth of global daily oil and gas supplies.

Houthi Advance Adds to Regional Risk

Iran-aligned Houthi forces seized a key Yemeni port this week, raising additional concerns about disruptions to Red Sea shipping routes. Analysts noted that attacks extending beyond the Strait of Hormuz signal a broader risk of prolonged regional instability affecting global energy supplies.

Diesel Prices Hit Record High Amid Refining Disruptions

Supply disruptions linked to the ongoing conflict, combined with Ukrainian strikes on Russian refineries, pushed U.S. diesel prices above $6 per gallon for the first time on record. Analysts expect diesel and other refined products to continue outperforming crude oil prices as long as shipping constraints and refining outages persist.

Meanwhile, the International Energy Agency projected further declines in global oil supply and demand this year, while major financial institutions raised their year-end price forecasts for crude and refined fuels. Separately, European Central Bank officials signaled openness to additional interest rate increases if rising energy costs continue pushing up broader inflation.