Brent Crude Oil Price Surges Above $114 a Barrel as US-Iran War Fears Return: What It Means for Pakistan's Fuel Costs

Brent crude surged above $114 a barrel on Friday, its highest level since May, as fears of a renewed United States and Israeli war on Iran pushed oil prices to a third straight week of gains — a rally that threatens to feed through to fuel prices in Pakistan within days under the country's new daily pricing system.

Main News Report

December Brent crude futures rose 1.3 per cent to $114.64 a barrel on Friday, while US West Texas Intermediate crude gained 1.5 per cent to $100.95, according to The Wall Street Journal's market report. The gains extended Thursday's sharp rally, when Brent climbed 4 per cent to settle at $113.17 — its highest close in more than five months — and US crude added 2.4 per cent to $99.47.

Reuters reported that oil had hovered above $110 a barrel throughout the week even though crude shipments leaving the Gulf remained near pre-war levels, with Brent trading at a fresh five-month peak above $114 on Friday — a sign, the agency said, that traders are bracing for another round of strikes in the Middle East. Analysts at ABG Sundal Collier noted Brent was up about $9.5 a barrel week on week, heading for a third consecutive weekly gain.

The immediate triggers are military. Washington is preparing additional military options against Iran and moving more forces towards the region, deploying a third aircraft carrier strike group and extra Marines while relocating some military and diplomatic personnel — a drawdown PakInsight Hub reported earlier this week when the US ordered diplomats out of Saudi Arabia. Iran has warned publicly and through private diplomatic channels that renewed US and Israeli strikes would prompt attacks on airports, pipelines and other economic infrastructure across the Gulf, and Tehran retains significant missile and drone stockpiles despite the damage of the war so far.

Background Context

The United States and Israel launched the war against Iran on February 28, and energy markets have swung on every escalation since. This week's rally followed fresh attacks by Yemen's Iran-aligned Houthi movement on Saudi Arabia's Shaybah oilfield and King Fahd International Airport in Dammam on Wednesday — strikes PakInsight Hub covered as four more people were killed in the attacks on Saudi Arabia. Saudi Arabia's energy ministry said operations at Shaybah were unaffected despite casualties from falling debris.

Iran has also kept pressure on shipping. Tehran claimed this week that seven tankers were struck in the Strait of Hormuz in a single day, and its Revolutionary Guard has threatened US bases across the region. Yet physical supply has held up better than prices suggest: tracking data indicates about 14 million barrels a day were exported through the strait last week, around 82 per cent of the pre-war total, as a US-led effort to ferry oil through the waterway brought flows close to normal.

Reactions and Statements

Analysts say the rally is being driven by risk rather than by any actual loss of supply. ING analysts said on Friday that prices are being supported more by the risk of renewed disruption than by current supply conditions, with Gulf oil flows remaining resilient. Tamas Varga of PVM Oil Associates told Rigzone that persistent Houthi threats to Saudi oil installations and renewed strikes on vessels in the Strait of Hormuz more than offset the rise in exports out of the region, and that reports of a potential short but intense US-Israeli attack on Iran were convincing investors that peace in the Gulf remains elusive.

Dennis Kissler, senior vice president of trading at BOK Financial Securities, told Bloomberg that the latest geopolitical escalations point to a more intense attack against Iran, pushing crude higher, and that most investors now expect prices to stay higher for longer. Expectations are rising that another round of joint US-Israeli strikes could come soon after the US midterm elections on November 3, even though President Trump has previously said he does not intend to strike Iran again before the vote.

Why This News Matters

For Pakistan, a sustained oil rally is an economic problem arriving at speed. Pakistan imports the bulk of its crude oil and refined fuel, so every dollar added to the Brent price widens the import bill, pressures the rupee and feeds inflation through transport and power costs. The pass-through is now almost immediate: under the daily pricing mechanism that began this week, pump prices are revised every day — PakInsight Hub reported this morning that petrol was cut by Rs1.60 to Rs377.71 a litre for October 23, but a week of $110-plus crude points in the opposite direction for the revisions ahead.

The timing is difficult. The IMF this week forecast a 1.3 per cent economic contraction for Pakistan, the Middle East and North Africa in 2026 as the Iran war rages — a warning that assumed continued disruption, but not a fresh escalation. If oil holds above $110, the government's room to shield consumers through levy cuts narrows just as protest pressure over the petroleum levy is building.

Future Developments

Traders will watch three things in the coming days: whether the United States moves further forces into the Gulf or signals a strike timeline after the November 3 midterms; whether Houthi attacks on Saudi energy infrastructure continue after this week's deadly strikes; and whether Hormuz exports hold near pre-war levels or fall if tanker attacks intensify. In Pakistan, the daily fuel-price revisions will show within days how much of the global rally reaches the pump, and any move by the government to adjust the petroleum levy in response will be a key signal of how seriously Islamabad rates the inflation risk.

Sources

• The Wall Street Journal — Oil Prices Rise as Middle East Risks Persist
• Reuters — Global Markets View: oil at a five-month peak above $114
• Rigzone — Oil Hits $114 Intraday

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