Oil rises toward $94 as US-Iran war and refining deficits strain energy markets

Supply threats and diplomatic impasse

Crude oil prices advanced for a second straight week as the military conflict involving the United States, Israel, and Iran entered its sixth month without a diplomatic resolution. Brent crude futures stood at $93.82 a barrel on Friday, while US West Texas Intermediate crude traded at $86.78 a barrel, marking five-day gains of more than 7% and 8% to reach their highest levels since July 24. A prior peace agreement expired during the week with neither side attempting to restart talks. Shipping traffic through the Strait of Hormuz remained heavily curtailed, with only nine vessels transiting on Wednesday compared to pre-war conditions when one-fifth of global oil consumption moved through the waterway.

Both sides are dug in but lacking the luxury of time to play the waiting game, against a backdrop of crude prices grinding unerringly higher.

Sanctions and escalating economic isolation

The diplomatic deadlock has been accompanied by expanded economic penalties targeting Tehran. On Wednesday evening, US President Donald Trump threatened economic penalties against any foreign nation providing assistance or lifelines to Iran. The US Navy continues to enforce a naval blockade that halts Iranian seaborne oil exports. In the region, the United Arab Emirates, which accounts for 30% of Iranian imports, suspended all trade activities, commercial exchanges, and financial transactions with Tehran until further notice.

Severe strain across global fuel refining

While crude prices remain below their peak of $118 a barrel, refined fuel markets face acute supply constraints. European diesel prices have climbed more than 70% since the outbreak of hostilities on February 28, while US retail gasoline rose approximately 60% to a national average of $4.10 per gallon. According to the International Energy Agency, the war knocked out more than 20% of the Middle East's 9.6 million barrels per day in refining capacity. Ukrainian strikes on Russian energy facilities reduced Russia's refining throughput by nearly 30% to below 4 million barrels per day, leading Moscow to ban diesel exports in July. European diesel refining margins exceeded $75 a barrel, while US diesel margins reached $100 a barrel.

Market volatility and infrastructure defenses

The energy disruption has generated broad financial volatility and prompted defensive measures across energy sites. The US 10-year Treasury yield rose to 4.67%, while German borrowing costs climbed to a 15-year high due to defense spending requirements. The European STOXX 600 index held flat at 651.44 points, though basic resources dropped 0.7% and travel stocks fell 0.4% on fuel cost concerns. Meanwhile, US drone and radar manufacturer Powerus secured a $22.3 million contract to deploy counter-drone surveillance and tracking across Middle Eastern oil facilities ahead of its planned merger with Aureus Greenway Holdings Inc in October 2026. The Energy Information Administration reported that global petroleum inventories declined by 3.5 million barrels per day between March and July, pushing US diesel stockpiles to their lowest seasonal mark in 30 years.