Oil Surges Past $110 as Geopolitical Tensions Flare: Hormuz Attacks and Ukraine Conflict Send Prices Soaring

By CNBC Staff

Crude oil prices experienced a significant surge on Friday, with Brent futures breaching the $110 per barrel mark for the first time since May. This dramatic increase is fueled by escalating geopolitical tensions, including increased attacks in the Strait of Hormuz, renewed missile strikes by Houthi militants on Saudi Arabia, and Ukraine's vow to retaliate against Russian refineries. Brent oil closed at $109.86, marking a 3.7% gain for the day, while U.S. West Texas Intermediate (WTI) rose 3.5% to settle at $101.41 per barrel. WTI saw a weekly gain of over 10%, and Brent advanced nearly 5%.

Key Developments Igniting Market Fears:

• Hormuz Escalation: At least nine commercial ships have been attacked near the Strait of Hormuz since Sunday, as Iran intensifies efforts to disrupt crude oil exports. Iran is reported to have sunk the container ship GFS Pride on Wednesday, with U.S. Central Command confirming the incident. The crew was safely evacuated. These attacks have resulted in three seafarers injured and two missing.
• Houthi Militant Activity: Iran-allied Houthi militants in Yemen have continued their assault on Saudi Arabia. Oil giant Aramco's administrative building in Dhahran was hit on Tuesday. The Houthis also launched an attack on Riyadh's international airport on October 10, causing casualties.
• Ukraine Conflict Fallout: The "energy ceasefire" brokered by President Donald Trump between Ukraine and Russia has quickly deteriorated. Russia continues its attacks on Ukrainian infrastructure, prompting Ukrainian President Volodymyr Zelenskyy to declare that Kyiv will resume strikes on Russian refineries in retaliation.

Market Impact and Outlook:

The escalating conflicts are severely impacting global energy flows. Crude exports through the Strait of Hormuz have seen a pullback, with shipments standing at 9.4 million barrels per day for the week ended Wednesday, approximately 70% of the pre-war average. The ongoing disruptions have contributed to a sharp rise in diesel prices, which are up more than 70% year-on-year in the U.S. Additionally, a significant decline in U.S. commercial crude oil inventories, exceeding 8 million barrels for the week ended October 9, further supported higher oil prices, attributed to production shut-ins on the Gulf Coast following Hurricane Isaias.