Oil Prices Surge as US Threatens Iran with Indefinite Blockade and Severe Financial Sanctions

Oil prices rose on Friday as ongoing tensions in the Middle East reignited supply concerns following US threats to impose an "indefinite" blockade and fresh financial sanctions on Iran.

Brent crude increased by 1.03 per cent to reach $87.97 a barrel at 1.09pm UAE time, while West Texas Intermediate climbed 1.62 per cent to $82.56 per barrel. Earlier in the session, both benchmarks had gained nearly 2 per cent.

US Defence Secretary Pete Hegseth announced on Thursday that the nation's navy is prepared to maintain a persistent presence in the area to enforce the blockade of Iran in the Strait of Hormuz. Speaking to reporters during a trip to Panama, he stated that the United States Navy can sustain the blockade indefinitely by rotating ships in and out.

In a separate interview on Newsmax, US Treasury Secretary Scott Bessent revealed that Washington is preparing additional financial measures against Tehran. He noted that upcoming announcements next week will introduce measures of economic isolation never before seen in a country's history.

The continuous diplomatic friction between Washington and Tehran, compounded by Houthi aggression in the Red Sea, has kept oil prices elevated throughout the week, putting crude on track for a weekly gain of nearly 6 per cent from the previous Friday's close.

Norbert Rucker, head of economics and next-generation research at Swiss lender Julius Baer, explained that the oil market remains gripped by uncertainty surrounding the US-Iran conflict. He highlighted that Middle Eastern geopolitics and gridlock between the US and Iran continue to drive supply fears.

Meanwhile, the International Energy Agency slashed its 2026 global oil supply forecast to its lowest level of the year, projecting a decline of 4.3 million barrels per day. The US Energy Information Administration anticipates that oil disruptions stemming from the Iran war will reach 600,000 bpd until the end of next year. Opec's monthly report also adjusted its outlook, cutting global demand growth for 2026 to 580,000 bpd in its fourth consecutive downward revision.

Ole Hansen, head of commodity strategies at Saxo Bank, remarked that the ongoing war of words leaves no clear path toward reopening the Strait of Hormuz. He added that while emergency stock releases have bridged the gap, strategic inventories will eventually need to be rebuilt.