By Bloomberg News

(Bloomberg) -- Oil headed for another weekly gain as the war in the Middle East raged on, with the Strait of Hormuz all-but-closed, strikes continuing across the region and analysts warning the crisis may deepen.

Brent traded near $109 a barrel, up by about 6% this week, after closing at the highest since mid-2022 on Thursday. Oil prices have swung on average by more than $10 a day since the war began, with open attacks on energy infrastructure heightening volatility.

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Iran pressed ahead with strikes on Persian Gulf neighbors even after Prime Minister Benjamin Netanyahu said Israel would refrain from targetting Iranian energy facilities, while President Donald Trump sought to de-escalate the attacks on oil and gas assets.

A strike on Iran’s South Pars gas field earlier this week was followed by Tehran’s retaliation on a host of key facilities across the region, sending prices for crude and European natural gas soaring, while officials raced to contain the fallout.

Brent has gained almost 50% this month, outpacing advances in US benchmark West Texas Intermediate, with the war approaching the end of its third week. The conflict has triggered the near-complete closure of the Strait of Hormuz, leaving supplies stranded in the Persian Gulf and forcing top OPEC producers to cut output.

“The main driver this week was the conflict’s expansion from a transit/logistics crisis into direct attacks on Middle East energy infrastructure,” analysts at consultant FGE NexantECA wrote. “If the current situation continues, oil markets will remain highly nervous, with upside to prices probably more likely than downside.”

The Islamic Revolutionary Guard Corps said it was still able to produce missiles, the semi-official Fars news agency reported. Meanwhile, Kuwait shut down several units at its Al Ahmadi refinery following drone attacks, and Saudi Arabia intercepted missiles.

On Thursday, Trump tried to downplay the surge in oil during an appearance with Japan’s prime minister. “I thought there was a chance it could be much worse,” he said. “It’s not bad, and it’s going to be over with pretty soon.”

US efforts to tame prices, including the release of strategic reserves, have widened the discount of WTI to Brent to about $14 a barrel. The country is also the world’s top producer and neighbors Canada, a major heavy crude supplier, making it less dependant on Middle East crude than Asia and Europe. That’s led to an unusual situation where Brent is set for a weekly gain, while WTI is headed for a weekly drop.

In other energy markets, European natural gas futures surged to almost double their pre-war level. Fuel prices also climbed, underscoring the wider inflationary risks from the conflict, with central bankers warning that a protracted war raises the risks of tighter monetary policy.

Meanwhile, US Treasury Secretary Scott Bessent said it’s likely Iran’s regime will probably collapse within itself. He also said the US is looking to remove sanctions on Iranian oil in an effort to lower surging energy prices, and could also look at a unilateral release of its reserves.

The White House also doesn’t plan to ban the export of oil and gas, a Trump administration official said Thursday, following a meeting between Vice President JD Vance and oil executives. The industry had warned such a move would only hurt producers.

The conflict has inflicted the biggest supply disruption in the history of the global oil market, forcing producers around the Gulf to collectively shutter roughly 10 million barrels of daily output, according to the International Energy Agency.

Saudi Arabia, the biggest crude exporter, has a base case that sees prices soar past $180 a barrel if the disruptions last until end-April, the Wall Street Journal reported, citing unidentified officials.

The energy crisis continues to deepen, as “nothing points to a limited engagement at this juncture,” according to RBC Capital Markets LLC. Tehran is still “effectively in control of the Strait of Hormuz,” with the US strike on Kharg Island, its main export hub, failing to change its calculus, analysts including Helima Croft said in a note.

--With assistance from Charles Gorrivan.

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