Crude Oil Market Update: Week Ending with Declines Amid Hormuz Crisis

Crude oil futures traded lower overall for the week, with prices moving sideways during US intraday trading on Friday. The decline was driven by market hopes that the war with Iran may be nearing a conclusion, despite ongoing reports of attacks and reprisals involving US warships in the Strait of Hormuz. The US government maintained that a ceasefire in the region remains in effect while awaiting Tehran's response to a US proposal to end the conflict and reopen the strait.

Weekly Price Performance

US benchmark West Texas Intermediate (WTI) closed 6% lower for the week, settling just under $95 per barrel, with futures prices barely moving throughout Friday's trading session. Similarly, European Brent futures also closed 6% lower for the week at approximately $100 per barrel, rising by less than a percentage point during Friday trading.

Diplomatic Developments

US Secretary of State Marco Rubio, traveling in Italy, stated that the US government is still awaiting Iran's response to Washington's latest push for an end to the war. Reports from Pakistan, where the government in Islamabad is leading mediation efforts, suggest that both sides are closing in on a deal.

Analyst Outlook and Market Factors

Despite the weekly decline, analysts predict elevated oil prices lingering for the rest of the year due to the extended Strait of Hormuz closure and steep draws on oil stockpiles. Barclays noted that even in the most optimistic scenario, oil prices are probably too low, as demand remains largely resilient and inventories continue to draw fast. The investment bank expects oil prices to average $100 per barrel for all of 2026.

A recent US government announcement to move more oil from the Strategic Petroleum Reserve (SPR) to markets via a swap agreement appeared to have no effect on the market. Barclays explained that while SPR, spare capacity, and potential US supply response are all skewed toward addressing the crude supply issue, refined product supply is a bigger constraint, especially for middle distillates.

Natural Gas Market Divergence

US natural gas prices remained virtually unchanged for both the day and week, with the Henry Hub index closing at around $2.75 per million British thermal units. Henry Hub prices have remained remarkably insulated from the turmoil in the Middle East. In contrast, European gas prices have shot up dramatically since Iran cut off one-fifth of the world's oil and gas supply by shuttering the Strait of Hormuz.