Oil prices surged sharply this week as military tensions between the United States and Iran escalated once again, leaving crude futures to finish the week higher.

The renewed strikes have disrupted supply chains across the Middle East, weighing on crude oil futures. The region is home to the Strait of Hormuz, the chokepoint through which roughly a fifth of global seaborne oil passes, so any escalation between Washington and Tehran tends to ripple through global freight and insurance costs as well as physical barrels. Analysts warned that prices could climb further if the conflict deepens.

Beyond the geopolitical pressure, US retail diesel prices hit record highs, adding fuel to global inflation concerns. Diesel is the workhorse fuel of freight and logistics, so record pump prices feed directly into shipping and goods-delivery costs, making the inflation signal harder for policymakers to ignore.

On the macroeconomic side, positive US employment figures released this week could strengthen the case for the Federal Reserve to raise interest rates in the near term. A firmer labor market and rising energy prices together complicate the Fed's inflation fight, since higher rates typically support the dollar, which can in turn pressure dollar-priced commodities like crude.

Meanwhile, tanker flows in the region remain impaired as the security situation continues to unfold, with shipowners and insurers keeping a close watch on route risks around the Gulf.

Source: Economic Times Markets