Market Move
Oil prices edged higher in Asian trade on Friday, with Brent crude futures up 0.7% to $89.64 per barrel and West Texas Intermediate (WTI) crude up 0.6% to $84.06 per barrel. Both benchmarks were on track for a nearly 7% weekly loss as renewed hopes for peace talks weighed on prices, yet they were set to surge almost 21% in July – the largest monthly gain since March.
Geopolitical Developments
The price rally follows fresh U.S. strikes on Iranian military targets, which provoked retaliatory Iranian missile attacks on U.S. positions and regional allies. The conflict further spread when an unidentified drone hit gas vessels at Egypt’s Damietta port near the Suez Canal, igniting fires and raising fears that the Suez Canal and the adjacent SUMED pipeline – key routes for crude and refined fuel to Europe – could be threatened. Houthi militants have intensified attacks on Red Sea shipping, while Iran continues to assert control over traffic through the Strait of Hormuz, prompting shipowners to reconsider routes. In response, Saudi Arabia held talks with representatives from 43 countries to form a maritime coalition aimed at safeguarding shipping in and around the Red Sea against the Iran‑backed Houthi blockade.
Supply‑Side Pressures
Attacks on refineries across the Middle East and Russia have tightened supplies of gasoline, diesel and jet fuel, keeping refining margins near record highs despite crude prices remaining below historic peaks.
Inventory Data
U.S. Energy Information Administration (EIA) data released on Wednesday showed commercial crude stockpiles fell by 7.2 million barrels, reaching 404.5 million barrels in the week ended July 24. This draw left U.S. commercial crude inventories at their lowest level since 2018, reinforcing concerns that an expanding Middle East conflict could further tighten global supplies.
Outlook
The combination of heightened geopolitical risk, attacks on critical energy transit routes, and a sharp decline in U.S. crude inventories underpins expectations that oil prices could maintain upward momentum throughout the month, barring any de‑escalation in the region.