What happened
Brent crude, the international oil benchmark, traded near 100 dollars a barrel this week and was on course to gain almost 14 percent, its strongest weekly rise in more than two years. The surge was driven by a sharp escalation in tensions between the United States and Iran.
US Central Command carried out a run of overnight strikes on Iranian military and maritime targets, and President Donald Trump threatened further action against Iran and the Houthis over attacks on Red Sea shipping. Iran-backed militants struck two Saudi oil tankers, disrupting a key export route.
Prices then swung lower late in the week, with Brent falling nearly 4 percent to around 96.80 dollars, after reports that Pakistan, backed by China, was trying to revive negotiations between Washington and Tehran. The whipsaw shows how tightly the oil price is now tracking every diplomatic and military headline.
Why it matters
Oil is the lifeblood of the global economy, feeding into the price of petrol, diesel, heating, food and almost every manufactured good. When crude jumps, those costs eventually flow through to households and businesses everywhere.
A sustained move toward 100 dollars threatens the recent progress on inflation. Central banks in the UK, US and Europe have been edging toward rate cuts, but an oil-driven spike in prices could force them to hold off, keeping borrowing costs higher.
The flashpoint is the Strait of Hormuz, the narrow shipping lane through which a large share of the world oil supply passes. Any serious disruption there would send prices far higher, which is why markets react so violently to each new headline.
Explained simply
Think of the Strait of Hormuz as a single narrow doorway that much of the world oil supply must squeeze through: rattle that doorway and the whole global market flinches.
Oil prices are set by the balance of supply and demand, but they are extremely sensitive to fear. Traders do not wait for supplies to actually be cut off; they raise prices the moment a serious disruption looks possible, to protect against the risk.
That is why prices leapt on the US strikes and then fell back on hints of talks. Nothing about the physical amount of oil in the world changed much day to day, but the perceived risk of a future shortage swung sharply.
For ordinary consumers, the mechanism is simple. Higher crude prices raise the cost of refining petrol and diesel, and those increases reach the pumps within a couple of weeks, then ripple out to the cost of delivering everything from food to furniture.
What it means for you
Expect movement at the petrol pump first. A sustained rise in crude toward 100 dollars typically adds several pence per litre to petrol and diesel within a fortnight, adding a few pounds to the cost of filling an average tank.
Heating and household bills are next in line. Higher oil and gas prices push up the cost of energy, which compounds the UK energy price cap rise already due this autumn, tightening budgets further as the colder months approach.
For savers and investors, energy shares in a typical FTSE 100 tracker, such as the big oil producers, tend to rise when crude climbs, which can cushion part of the blow to a diversified portfolio even as fuel costs bite at home.
The bigger picture
Oil is on track for one of its strongest months in years, a reminder of how quickly geopolitics can upend a calm market. The direction from here depends almost entirely on whether diplomacy or confrontation wins out.
Watch the Strait of Hormuz and any signs of genuine US-Iran talks. A negotiated de-escalation could send prices tumbling back toward pre-crisis levels, while a serious supply disruption could push crude well above 100 dollars and reignite inflation worldwide.
