Oil moves higher as U.S. threatens 'economic isolation' of Iran

• U.S. Treasury Secretary Bessent warned of unprecedented measures for Iran's 'economic isolation' while Defense Secretary Hegseth confirmed the blockade could be maintained indefinitely
• The UAE reported that Iran attacked two state-owned Abu Dhabi National Oil Company vessels transiting the Strait of Hormuz on Thursday evening
• Despite Thursday's 2% decline, both oil benchmarks remain up approximately 4% for the week following sustained rally amid ongoing tensions in the critical shipping corridor

Summary

Market Movement:

Oil prices rose Friday morning, with Brent crude gaining 0.96% to $87.91 per barrel and West Texas Intermediate (WTI) up 1.08% to $82.13 by 2:55 a.m. ET. Both benchmarks remain on track for weekly gains of approximately 4%, despite retreating 2% during Thursday's session.

Key Drivers:

The price increase follows escalating U.S.-Iran tensions centered on the Strait of Hormuz, a critical chokepoint for global energy flows. Treasury Secretary Scott Bessent warned of unprecedented measures aimed at Iran's "economic isolation" in a Newsmax interview. Defense Secretary Pete Hegseth confirmed U.S. forces could maintain an indefinite blockade of Iranian ports.

Geopolitical Context:

The United Arab Emirates reported Thursday evening that Iran attacked two vessels belonging to state-owned Abu Dhabi National Oil Company while transiting the strait, heightening regional security concerns.

Conflicting Signals:

Thursday's price retreat came after reports claimed oil exports through the Strait of Hormuz are higher than independent estimates suggest. Additionally, global oil demand forecasts have been revised downward for the year amid ongoing disruptions around the strait.

Market Implications:

The sustained rally reflects market concerns over potential supply disruptions through the Strait of Hormuz, which handles significant global oil traffic. The combination of U.S. military action, Iranian aggression against commercial vessels, and threats of economic isolation creates considerable uncertainty for energy markets. Traders are balancing immediate supply concerns against weakening demand forecasts, resulting in volatile but generally upward price momentum.