Oil prices on Friday posted their best week since mid-to-late July, as military action erupted between the U.S. and Iran for the first time in weeks and heightened concerns over persistent supply disruptions through the Strait of Hormuz.

Notably, at home, U.S. diesel prices touched a record high.

Brent crude futures expiring in November, the global benchmark, soared 8.8% for the week to settle at $95.85 a barrel, while U.S. West Texas Intermediate crude futures expiring in October surged 9.4% to settle at $91.22 a barrel. Both contracts sit at their highest levels in roughly three months.

Bessent says EU ’officially’ part of Operation Economic Outcast
U.S. Treasury Secretary Scott Bessent on Thursday evening said the European Union had "officially joined" an operation spearheaded by Washington to economically squeeze Iran.

"The world is sending a clear message to the Iranian regime: We will not stop until every remaining financial lifeline has been severed," Bessent posted on social media. He pointed to an August 31 statement from the European Commission which said the EU had "adopted extensive sanctions to prevent Iran from exploiting the global economy and financial system" and remained ready to "take further measures."

While the U.S. had recently appeared to shift to a strategy of economic warfare against Iran following an extended impasse over control of the Strait of Hormuz, this week was highlighted by a resurgence in military action between Washington and Tehran for the first time since July.

Both sides traded tit-for-tat strikes, though President Donald Trump told reporters this week that the latest flare up in kinetic action would not last "too long." The U.S. leader said American strikes had targeted infrastructure that Iran had been rebuilding around the strait, while Iranian state media said Tehran had retaliated with attacks on U.S. military bases in regional countries.

"Escalation is propping up crude, but the rally may lose traction if Hormuz shipments keep moving smoothly," ING analysts said in a note.

Diesel prices eclipse 2022 record to hit new all-time high
At home, the rise in global oil prices were making their mark felt at the pump. According to GasBuddy, the national average price of diesel reached a new record high of $5.85 a gallon, topping the previous benchmark of $5.82 a gallon set in June 2022. Meanwhile, according to AAA, the national average price of gas stood at $4.1474 a gallon, up from $4.1436 a day ago.

"Diesel is the fuel that moves the economy, and when diesel prices reach record levels, the impact extends far beyond the transportation sector. Higher diesel prices impact consumers as rising supply chain costs increase the price of groceries, household goods, deliveries, and countless other products Americans rely on every day,” Patrick De Haan, head of petroleum analysis at GasBuddy, said in a statement.

U.S. Vice President JD Vance on Thursday told reporters that gas prices were high because Iran kept shooting at commercial ships.

"We can accept the Iranians are going to shoot at ships like crazy people, and we’re going to do what we have to do in order to ensure that their efforts don’t lead to a worldwide energy crisis. Now, we’ve been quite successful up to this point. Gas, frankly, could have been much, much higher were it not for our efforts. But I’m not going to make a promise about when it’s going to return to $3," the U.S. vice president had said.

"Major combat operations are currently not ongoing and they haven’t been ongoing in a very long time. In fact, what we did just a couple of days ago, is that we made it harder for the Iranians to shoot at commercial shipping, again, in order to ensure the flow of oil and gas into world energy markets," he added, referring to U.S. strikes on Tuesday.

Oil is also being supported by signs of tighter inventories. U.S. commercial crude stocks fell to about 424.5 million barrels in the week ended August 28, down from 428.9 million barrels a week earlier, according to the Energy Information Administration. The U.S. Strategic Petroleum Reserve stood at about 286.6 million barrels.

Supply policy from OPEC+ will also be in focus. The group is expected to keep its October oil output policy unchanged when it meets on Sunday, Reuters reported, citing sources. The meeting comes as the producer group completes the unwinding of one layer of production cuts, although disruptions through Hormuz have reduced the impact of its production decisions on prices.

Source: Investing.com

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