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US Oil Update: Futures Ease as Mideast, Ukraine Conflict Stay in Focus

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Crude oil futures held steady in midday trading on Friday, but were on track for a weekly gain, as heightened US-Iran tensions stoked concerns over Middle East supply risks, while US peace envoys are set to visit Moscow for talks to end the war in Ukraine.

Front-month West Texas Intermediate futures slipped 0.4% to $90.94 per barrel, while Brent futures eased 0.2% to $95.70/bbl.

Soojin Kim, research analyst at MUFG, said oil headed for its strongest weekly gain since July as renewed US-Iran hostilities revived concerns over prolonged disruption to energy flows via the Strait of Hormuz.

Iran's military said on Thursday it targeted US bases in Kuwait and the UAE, the state-run Tasnim News Agency reported. Kuwait said it responded to missile and drone threats, but the UAE hasn't announced any incidents.

US attacks earlier this week that killed and wounded dozens marked the fiercest clashes between Tehran and Washington since July. Israel also signaled preparedness to return to fighting if necessary, fueling concerns that the ongoing conflict could widen, according to media reports.

The European Union has formally joined the US-led sanctions campaign against Iran, while South Korea is weighing a military role to help reopen the Strait of Hormuz. US Treasury Secretary Scott Bessent praised the bloc for signing on to "Operation Economic Outcast," the campaign aimed at severing Tehran from the global financial system.

"The world is sending a clear message to the Iranian regime: We will not stop until every remaining financial lifeline has been severed," Secretary Bessent said in a social media post on X.

On Friday, the US Treasury imposed new Iran-related sanctions on a small Turkish investment bank and two subsidiaries as the Trump administration ramps up economic pressure on Iran.

"Financial institutions continue to find out the hard way that we are serious about Operation Economic Outcast," Bessent said.

Meanwhile, Trump's envoys Steve Witkoff and Jared Kushner are set to travel to Moscow and Kyiv this weekend for talks aimed at ending the war, according to media reports.

Ukrainian drone strikes on Russian energy infrastructure have squeezed global energy supplies in the recent past.

On the demand front, the price of diesel fuel hit a record Friday, as truckers in the US are paying an average of $5.85 per gallon nationwide, a 60% increase compared to the same period a year ago when diesel cost $3.71 per gallon.

ING strategists said that unless Persian Gulf and/or Russian diesel flows recover, the market is likely to tighten further as we head towards winter.

Commercial vessel traffic through the Strait of Hormuz fell by half on Aug. 31, while activity through the Bab el-Mandeb waterway remained broadly stable, Kpler said on Friday, signaling continued disruption to shipping in the Middle East.

The latest data from Kpler shows that five vessels crossed the Hormuz on Aug. 31, down from 10 a day earlier.

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