Here is a look at what happened in oil markets in the week of Oct. 5-9 and what the focus will be in the days to come.
OVERVIEW: Oil prices are on track for a weekly gain despite retreating earlier in the session after President Trump said the U.S. wouldn't attack Iran before the midterm elections, citing "productive" talks with Tehran. Brent crude, the global benchmark, trades around $104 a barrel, while WTI futures hover near $92.
MACRO: Escalating attacks in the Middle East continue to sustain a high geopolitical risk premium in oil prices, with many analysts anticipating prolonged supply disruptions into early 2027. At the same time, markets are increasingly focused on the inflationary implications of higher energy prices and their potential impact on the U.S. Federal Reserve's policy path. Renewed concerns that persistent energy-driven inflation could prompt further monetary tightening have shifted interest-rate expectations, with CME's FedWatch tool indicating a 19% probability of a rate hike in October and an 86% probability in December.
GEOPOLITICAL RISKS: Oil prices have climbed sharply over the week, with Brent crude above $105 a barrel on fears of military escalation in the Middle East. Supply concerns have intensified amid an increase in Iranian attacks on vessels in the Persian Gulf and Houthi strikes on Saudi Arabia. While exports flows had recovered at around prewar levels, analysts at Kpler say recent attacks have driven flows sharply lower this week: confirmed total oil flows through the Strait of Hormuz dropped sharply to 2.72 million barrels a day on Oct. 7 from 12.26 million barrels a day on Oct. 4.
In the U.S., a hurricane has forced some major producers to shut down production on the Gulf Coast, putting at risk key refineries in the region and threatening to further tighten an already constrained market for refined oil products.
SUPPLY AND DEMAND: A recent recovery in exports shouldn't be mistaken for a return to normal market conditions, analysts say. Shipping costs remain exceptionally high, and significant refining capacity across the Middle East is still offline. As a result, supplies of refined products remain tight and prices elevated, particularly for middle distillates such as diesel, jet fuel and heating oil.
The G7's announcement of a 100-million-barrel release of crude oil and diesel initially eased market concerns, but the impact has since faded as it became clear that some of the volume reflected the acceleration of previously planned releases rather than additional supply. Moreover, strategic reserves can provide only temporary relief; they can't repair damaged refineries or restore disrupted distribution networks, says Ole Hansen from Saxo Bank.
WHAT'S AHEAD: Next week, attention will turn to fresh oil-market data, with OPEC and the International Energy Agency set to publish their monthly reports. The IEA's assessment of global inventories will be particularly important following last week's announcement of emergency oil stocks.
China's trade data will also be closely watched, especially crude oil imports and refined-product exports. Beijing has helped ease market tightness by reducing crude imports while increasing product exports, and any change in this trend could have significant implications for the global supply outlook, analysts at Commerzbank said.
On the U.S. economic calendar, focus will turn to CPI inflation data due on Wednesday and PPI figures due on Thursday for more cues on the interest-rate path this year.