Brent crude retreated on Friday after approaching $110 a barrel but remained on course for a weekly gain of about 9%, as diplomatic efforts over shipping through the Strait of Hormuz competed with renewed concerns about disruptions across other critical Middle Eastern energy routes.
Oil prices have swung sharply this week as attacks on tankers and energy infrastructure intensified concerns over the availability of Middle Eastern crude. Brent fell back toward $104 a barrel on Friday after reaching nearly four-month highs, while U.S. West Texas Intermediate dropped below $100.
Despite Friday’s decline, both benchmarks remained significantly higher for the week as the market continued to price in prolonged disruptions to regional production, refining and shipping.
Diplomatic Efforts Turn to Strait of Hormuz
The pullback came as diplomatic efforts intensified to establish a temporary arrangement governing shipping through the Strait of Hormuz.
Gulf foreign ministers are expected to meet their Iranian counterpart in Oman on Monday as governments seek an arrangement that could improve maritime traffic through the strategic waterway, according to reporting cited by the Wall Street Journal.
The strait normally carries about 20 million barrels per day of crude and petroleum products, equivalent to roughly 20% of global oil consumption, according to the International Energy Agency. Traffic has fallen sharply since the conflict disrupted tanker movements.
Any sustained improvement in shipping conditions could help restore regional exports. However, continued fighting and attacks on energy infrastructure have kept uncertainty elevated.
IEA Forecasts Largest Oil-Demand Drop Since Pandemic
At the same time, the International Energy Agency sharply lowered its outlook for global oil consumption.
The IEA now expects world oil demand to contract by 2.5 million barrels per day in 2026, compared with its previous forecast for a decline of 1.6 million barrels per day. The reduction would represent the steepest annual decline since the Covid-19 pandemic.
Higher fuel prices and reduced product availability are weighing on consumption as the Middle East conflict disrupts international energy flows.
The agency also expects global oil supply to decline by 5.7 million barrels per day in 2026, substantially more than previously forecast, with normal Gulf flows now not expected to recover until 2027. Global inventories fell at a rate of about 3.1 million barrels per day in August, according to the IEA.
The supply contraction is therefore considerably larger than the projected decline in demand, leaving the market vulnerable to further disruptions despite weaker consumption.
OPEC Also Cuts Demand Outlook
OPEC has taken a different view on the direction of global consumption but has repeatedly lowered its expectations.
The producer group still expects global oil demand to increase by about 380,000 barrels per day in 2026, according to Reuters, but reduced its forecast for a fifth consecutive month. That contrasts with the IEA’s projection for a 2.5 million-barrel-per-day contraction.
Both organizations expect consumption to rebound in 2027, with the IEA forecasting growth of 2.6 million barrels per day and OPEC projecting an increase of about 2.36 million barrels per day.
Houthi Advances Add New Risk at Bab al-Mandeb
Supply concerns have also shifted toward the Bab al-Mandeb Strait, another major maritime chokepoint connecting the Red Sea with the Gulf of Aden.
Iran-aligned Houthi forces have expanded their positions along Yemen’s western coast, including the seizure of the port of Mocha. The IEA said Houthi-linked groups have attacked vessels transiting Bab al-Mandeb as well as Saudi energy infrastructure.
The developments raise the possibility of simultaneous disruptions around two of the Middle East’s most important maritime energy corridors — Hormuz and Bab al-Mandeb — even as diplomatic efforts seek to restore more reliable shipping through the Persian Gulf.
The combination of weaker global demand, declining inventories, constrained Middle Eastern production and continued security risks is keeping oil prices volatile after Brent returned above $100 this month.
