Oil Prices Head for Weekly Gains Driven by Middle East Tensions and Hurricane Isaias

Oil prices experienced a slight dip on Friday after US President Donald Trump ruled out launching attacks on Iran prior to the upcoming midterm elections next month, though crude remains on track for a weekly rise amid escalating geopolitical tensions.

Brent, the benchmark for two thirds of the world's oil, traded 0.82 per cent lower at $103.42 a barrel at 10.35am UAE time. West Texas Intermediate, the gauge tracking US crude, fell 0.74 per cent to $90.81 a barrel. Despite this, Brent is set to post a weekly gain after settling more than 4 per cent higher on Thursday, driven by Middle East tensions. WTI is also on course for a weekly decline, even as the US—the world’s biggest oil producer—braces for a powerful hurricane threatening oil output on its Gulf coast.

“Brent crude rose 4.1 per cent to $104.20 per barrel on Thursday as renewed Middle East tensions coincided with disruption to US Gulf of Mexico production from Hurricane Isaias,” said Nick Stadtmiller, chief economist and group head of research at Emirates NBD. “Around 63 per cent of US Gulf oil production has been shut in ahead of the storm, while prices came off their intraday highs after President Donald Trump said the US was holding productive discussions with Iran.”

Hurricane Isaias is moving towards the US Gulf coast, a region hosting offshore oil production sites, refining infrastructure, and export terminals. The hurricane is expected to hit the US coast late on Friday or early on Saturday, bringing heavy rain and potential flash floods. Soojin Kim and Edward Bell from MUFG noted that about 500,000 barrels per day of capacity are at risk from the hurricane.

“Ongoing fighting between Saudi Arabia and its allies against the Houthis are keeping the geopolitical risk in oil markets elevated while shipping in the Gulf and Strait of Hormuz continues to be threatened,” they said. The Houthis carried out deadly attacks on airports in Saudi Arabia's southern region and Riyadh this week, with debris from an intercepted ballistic missile damaging civilian sites in the kingdom's capital.

Meanwhile, Mr Trump stated on Thursday that he had no intention of ordering attacks on Iran before the midterm elections next month, which temporarily eased supply concerns. On Truth Social, he mentioned that Iran was in a “very bad condition” economically and militarily, and that the US blockade on Iranian shipments through the Strait of Hormuz would remain in “full force,” while adding that the countries were holding “productive discussions.”

Oil prices have remained volatile this week amid increased attacks on ships in the strait, a vital route for global crude shipments. The US also announced new sanctions on 17 vessels responsible for transporting millions of barrels of Iranian crude oil, as well as petroleum and petrochemical products, to markets in southern and eastern Asia. The US is aiming to squeeze Iran’s oil revenue and pressure Tehran as the regional war continues. Treasury Secretary Scott Bessent stated that the US Treasury is starving the tyrannical regime in Tehran of funds used to wage regional war, and will continue exposing those enabling the regime's oil sales.