Brent crude touched $115.84 on Friday, reaching its highest level since May, as geopolitical tensions in the Middle East pushed energy prices higher. Houthi attacks on Saudi Arabian energy targets and reports of potential new U.S. strikes on Iran fueled the move.
West Texas Intermediate crude rose 1.35% to $100.81, while heating oil gained 1.48% to $5.01 per gallon. U.S. natural gas fell 2.86% to $2.72 per million British thermal units.
Middle East Tensions Drive Oil Premium
Yemen's Houthis claimed responsibility for strikes on Saudi energy targets, including an Aramco facility in Yanbu and the Shaybah oilfield. Aramco subsequently ordered staff to leave its Dhahran headquarters on the Gulf coast. A separate pipeline shutdown in Libya also reduced output from two fields.
ING analysts noted that reports of potential fresh Iran strikes, coinciding with a second U.S. carrier deployment, have made their earlier forecast of $80 per barrel for the fourth quarter unrealistic. The bank stated that geopolitical risk premiums are likely to remain embedded in prices regardless of whether tensions escalate further.
Commodity trader Jack Prandelli highlighted a divergence in the market: Dated Brent, the physical cargo price, has declined from approximately $135 in early October to around $118, while Brent futures have climbed to about $112. The spread between these prices has narrowed from roughly $30 to under $10.
Crypto and Tech Markets Retreat
The oil rally occurred alongside a sharp decline in risk assets. The Nasdaq Composite fell 2.6% on Thursday to 26,008.86, while the S&P 500 lost 1.21%. Meta led the decline, falling nearly 7% after raising its 2026 spending guidance to $135 billion.
Cryptocurrency markets also experienced pressure, with total market capitalization falling 3.74% in 24 hours to $2.76 trillion. Ethereum, XRP, and TRON traded lower among major assets.
Higher oil prices can amplify pressure on risk assets through their effect on inflation expectations and the case for tighter Federal Reserve policy. Traders maintained approximately an 83% probability that the Fed would hold rates at its October 27-28 meeting, though renewed energy price gains could alter those expectations.
The upcoming week will bring two significant tests: the Fed's rate decision on October 28 and earnings reports from Microsoft, Amazon, and Alphabet. Whether Brent crude sustains levels above $115 through these events may influence the pace of risk asset recovery.
