Oil Prices Head for Largest Weekly Surge Since 2020 as Shipping Nears Standstill
The price of Brent crude oil soared on Friday, surpassing $88 per barrel and setting the stage for its most significant weekly gain in six years. This dramatic increase comes as hopes for de-escalation in the Middle East fade, leaving markets bracing for prolonged volatility.
Historic Weekly Increase
Brent crude has jumped approximately 21% over the past week, slightly exceeding the weekly gain recorded in March 2022 when prices rocketed following Russia's invasion of Ukraine. Prior to that, Brent crude prices shot up by around 23% in May 2020. If these gains hold through market close on Friday, it would mark the biggest weekly increase since the Covid-19 pandemic.
The current price represents the highest level since April 2024, with Brent crude trading above $87.50 per barrel on Friday morning and continuing to climb throughout the day.
Shipping Disruption Drives Price Surge
Worries about disruption to critical shipping routes constricting oil supply have sent wholesale prices soaring throughout the week. The Joint Maritime Information Centre, which provides reports to shipping companies, said in a note on Thursday that there was a "near-total temporary pause" in traffic through the Strait of Hormuz.
Only two confirmed commercial transits were observed in the previous 24 hours through this vital shipping route that transports about one-fifth of the world's oil and gas supplies.
Shipping firms are reacting to a combination of security threats, insurance constraints, operational uncertainty and disruption rather than a "declared blockade," according to the maritime information centre.
Market Turmoil and Expert Analysis
Greg Jackson, the chief executive of Octopus Energy, told Times Radio that energy markets were "in a state of turmoil" after Iran warned ships not to pass through the waterway and Qatar said it had halted gas production following attacks on its plants.
Despite the significant price increases, experts pointed out that oil prices remain far below levels seen during previous periods of turbulence. Rachel Winter, partner at Killik & Co, noted: "Oil prices continued to climb overnight, and Brent crude is now up around 25% since the start of February."
Winter added: "Consumers won't feel the full price difference at the pump quite yet as many companies buy oil in advance, but this could change if the conflict persists. The market seems hopeful for a quick resolution, or for some form of Government intervention, as we haven't seen oil prices rise to levels previously seen during times of significant and prolonged disruption."
For context, the price of Brent passed $120 per barrel following Russia's invasion of Ukraine in 2022, but it currently sits below $90 despite its recent substantial increase.
The combination of geopolitical tensions, shipping disruptions, and market uncertainty has created perfect conditions for this dramatic oil price surge, with all eyes on whether these gains will hold through the trading day's end.
