Oil prices are back at around $100 a barrel after their sharpest monthly rise since July, as stalled diplomacy between Washington and Tehran and tightening fuel markets keep fears about supply, inflation and interest rates alive.
A strong finish to September
Brent crude, the international benchmark, hovered close to $100 on Thursday and briefly touched $100.35. The day before, the expiring November contract settled at $103.50 a barrel, while the more actively traded December contract closed at $98.03. US West Texas Intermediate ended Wednesday at $90.42.
For September as a whole, Brent gained about 14%, its strongest month since July. WTI rose roughly 5%.
The war behind the price
The rally traces back to a conflict that began in late February. A large US-Israeli attack on Iran prompted Tehran to all but close the Strait of Hormuz, the passage through which about a fifth of the world’s crude supply normally travels. The seven-month war has caused the largest oil supply disruption on record and forced dozens of countries to draw on emergency reserves.
Prices have swung widely since. In late April, the Brent contract for June delivery reached $126.41, the highest since March 2022, before falling back as negotiators traded proposals. This week’s move above $100 is the latest turn in a cycle of hope and disappointment.
Hopes of a settlement have repeatedly flickered and faded. On September 30, Iranian officials said they had received an official US response to Tehran’s latest proposal for ending the war. They did not say what it contained or whether it amounted to a rejection. With no clear outcome, traders have kept a risk premium in prices.
Some oil is moving, but not enough
Not all of the region’s crude is stuck. In early September, flows through the strait were estimated at roughly 40% of pre-war levels, helped by a US-protected shipping corridor and by Saudi Arabia and the United Arab Emirates sending crude through ports outside the Gulf. The US Navy also continues to blockade Iranian ports, which limits Tehran’s own exports.
Those workarounds have softened the shock without ending it. Analysts note that the market has little spare cushion if shipments are disrupted again, particularly with fuel markets in the United States already described as tight.
OPEC+ stands pat
Seven OPEC+ producers held their October output targets steady at September levels. The decision suggests the group is weighing volatile prices against an uncertain timetable for peace, and it offers little relief to buyers hoping for extra barrels.
From the pump to the bond market
Higher crude feeds through to consumers quickly. When Brent first moved back above $100 in early September, the average price of a gallon of regular gasoline in the United States was $4.22, according to AAA, a 41% jump since the war began. Industry analysts have also pointed out that expensive fuel has cut demand for refined products in some markets, a sign that high prices are beginning to weigh on economic activity.
The effect reaches financial markets as well. Energy-driven inflation is a central reason the Federal Reserve raised interest rates last month for the first time since 2023, and why the 10-year Treasury yield has climbed to its highest level since 2002. In roughly a week, the 10-year yield rose from below 5% to above 5.3%. Before the war began, it was below 4%.
What to watch next
Three developments will shape the next few weeks. The first is whether Washington’s reply to Tehran’s proposal leads to formal talks or another breakdown. The second is how much oil moves through Hormuz, which will show whether the workaround routes can scale. The third is US fuel inventories, since low stocks of gasoline and diesel would leave prices more exposed to any new disruption.
For households and businesses, the practical message is that relief at the pump and in borrowing costs depends heavily on diplomacy. A credible deal to reopen shipping lanes would probably pull crude lower and take some pressure off inflation and bond yields. A collapse in talks would do the opposite, and with Brent already near $100, markets have little room left to absorb bad news.
