The Week in Oil: Fears of U.S.-Iran Escalation Push Brent to $117

By Giulia Petroni

Here is a look at what happened in oil markets in the week of Oct. 19-23 and what the focus will be in the days to come.

OVERVIEW: Oil prices are on track for another weekly gain on fears of renewed escalation between the U.S. and Iran after the midterm elections. Brent crude, the global oil benchmark, was around $117 a barrel in midmorning U.S. trade, while West Texas Intermediate was just below $103 a barrel.

MACRO: Rising energy costs are fueling concerns over inflation and interest-rate hikes. According to the FedWatch tool, traders broadly expect the U.S. central bank to leave interest rates unchanged next week, but they see a nearly 80% probability of a hike in December.

Meanwhile, consumer sentiment in the U.S. ticked lower in October, hovering near record-low levels, according to the University of Michigan's survey. Inflation expectations instead moved slightly higher.

GEOPOLITICAL RISKS: Fears that the U.S. could attack Iran after the midterm elections in early November are driving oil's rise this week. The U.S. has a third aircraft carrier strike group and an additional Marine expeditionary unit en route to the Middle East, while the military has moved some troops off bases in the region.

The buildup comes at a politically sensitive moment, with Israel's general election scheduled for Oct. 27 and the U.S. midterms a week later.

Tehran warned that a renewed U.S. and Israeli air campaign would prompt retaliation extending well beyond military targets. Iran threatened strikes on American bases and warships, as well as airports, pipelines and other civilian infrastructure in neighboring Persian Gulf countries.

At the same time, persistent attacks on shipping in the Strait of Hormuz and deadly strikes by Yemen's Houthi militants on Saudi Arabia are keeping the geopolitical risk premium high. The market's focus is less on how much oil is available today than on whether Middle East exports can be sustained if fighting intensifies again.

SUPPLY AND DEMAND: Kpler data show that oil flows through the Strait of Hormuz remain 26% below prewar levels, with the seven-day average at 12.65 million barrels a day, compared with a baseline of 17.15 million. Continued attacks on shipping are sustaining a risk premium in both freight rates and crude prices. Yet total Middle Eastern oil supplies reaching global markets, excluding Iran, remain above prewar levels.

Meanwhile, shipment of Russian diesel could be headed for the U.S., according to vessel-tracking data, potentially signaling a return of direct fuel deliveries as U.S. President Trump seeks to expand Russian supplies to international markets.

WHAT'S AHEAD: Markets will turn to the Federal Reserve's policy meeting on Oct. 27-28 and the release of the Fed's preferred inflation gauge, the personal consumption expenditures price index, on Oct. 29 for clues on the outlook for interest rates. On the energy front, next week's focus will be on any signs of a potential escalation between the U.S. and Iran, fresh data on crude and refined-product inventories, and developments in Russian diesel shipments.

Write to Giulia Petroni at giulia.petroni@wsj.com

(END) Dow Jones Newswires

October 23, 2026 12:51 ET (16:51 GMT)