Brent crude briefly approached $110 a barrel Friday and U.S. diesel remained above $6 a gallon as disruptions around the Strait of Hormuz and Red Sea intensified concerns about energy supplies, inflation and interest rates.
By yourNEWS Media Newsroom.
Oil prices pushed toward fresh highs Friday as the widening Middle East conflict continued disrupting major shipping routes and tightening fuel supplies, with Brent crude briefly reaching $109.97 a barrel while U.S. diesel remained above $6 a gallon.
Brent touched its highest level in several months before retreating to roughly $105 a barrel later Friday, while West Texas Intermediate remained near $100. Both benchmarks were still headed for gains of more than 9% for the week after a rapid escalation in attacks on tankers, energy infrastructure and shipping routes.
The rally has accelerated as the U.S.-Iran war increasingly threatens two of the most important maritime chokepoints for global energy markets: the Strait of Hormuz between the Persian Gulf and Gulf of Oman and the Bab el-Mandeb connecting the Red Sea with the Gulf of Aden.
Oil is continuing to move through Hormuz, including through so-called “dark crossings” in which tankers turn off tracking transponders, but Reuters analysis found Gulf exports remain substantially below prewar levels. Industry estimates have placed overall Gulf exports at roughly two-thirds of their earlier volume.
Pressure has simultaneously increased on the Red Sea route after Iran-aligned Houthi forces seized the Yemeni port of Mokha and advanced near the Bab el-Mandeb Strait, raising concerns that tanker traffic could face greater danger on the opposite side of the Arabian Peninsula.
Those developments have strengthened the geopolitical risk premium built into crude markets and prompted increasingly elevated price scenarios.
RBC Capital Markets’ Helima Croft has warned that Brent could exceed $120 a barrel before the end of the year if fighting continues and maritime disruptions worsen, particularly around Bab el-Mandeb. That figure is a conditional market scenario rather than a prediction that oil will necessarily reach that level.
The effects are already extending far beyond crude.
The U.S. national average for diesel climbed above $6 a gallon for the first time, reaching approximately $6.06 as global refining disruptions and limited inventories magnified the effect of higher oil prices. U.S. diesel stocks are about 13% below their five-year average even as domestic refineries operate near maximum capacity.
Patrick De Haan, head of petroleum analysis at GasBuddy, has described diesel prices at current levels as a “silent killer” for the economy because fuel costs move through transportation networks and ultimately into consumer prices.
Bob McNally, president of Rapidan Energy Group, has similarly described diesel as the “lifeblood” of the economy because trucks, trains, agricultural machinery, ships and construction equipment depend heavily on it.
That makes diesel particularly significant for inflation.
Higher trucking expenses increase the cost of transporting food, manufactured products and retail goods. Farmers face higher expenses operating tractors and other machinery, while construction, shipping and industrial companies must absorb or pass along additional fuel costs.
The International Energy Agency warned Friday that the global oil supply shortfall could deepen if normal Gulf flows remain delayed. The agency now estimates global oil supply will decline by 5.7 million barrels per day in 2026, while Saudi crude supply fell to roughly 6 million barrels per day in August, its lowest level in more than three decades.
The energy shock is also complicating the inflation fight for central banks.
U.S. consumer inflation reached 3.4% annually in August, while core prices rose 0.3% during the month. Combined with crude trading above $100 and elevated fuel costs, the data have reinforced expectations that Federal Reserve policymakers could consider additional monetary tightening as they work to return inflation toward their 2% target.
The danger for policymakers is that energy prices can produce two opposing economic effects at once: increasing inflation while also reducing household purchasing power and slowing business activity.
Europe is facing the same dilemma.
The European Central Bank raised all three of its key interest rates by 25 basis points Thursday, explicitly saying that the Middle East conflict “continues to generate inflation pressures” and that inflation is expected to remain well above its 2% target for an extended period.
The ECB now projects headline inflation averaging 3% in 2026, 2.5% in 2027 and 2.1% in 2028.
Bundesbank President Joachim Nagel said Friday that further increases could become necessary if energy prices remain elevated, while other ECB policymakers have similarly warned that persistent fuel and electricity costs could require policy to move further into restrictive territory.
At the same time, higher interest rates carry their own economic costs by making mortgages, corporate borrowing and other forms of credit more expensive.
That leaves the United States and Europe facing a difficult combination: an external energy shock pushing inflation upward while tighter monetary policy risks weakening growth.
For now, crude markets remain highly sensitive to developments in Hormuz, the Red Sea and Middle Eastern energy infrastructure.
Friday’s retreat from the $109.97 Brent peak demonstrated how quickly prices can move when signs of diplomatic progress or improved shipping conditions emerge. But Brent remained above $100, diesel remained at record levels and Gulf oil flows had not returned to their prewar pace.
If tanker traffic and refinery operations normalize, some of the geopolitical premium could unwind.
If disruptions instead deepen around Hormuz and Bab el-Mandeb, the increasingly discussed $120-a-barrel scenario could move closer into focus — adding further pressure to transportation costs, consumer prices and central banks already struggling with inflation.
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