What happened
Brent crude, the global benchmark oil price, traded around 96 dollars a barrel at the end of the week, having briefly broken above 97 dollars, and closed out a gain of almost 9 percent over five sessions. US West Texas Intermediate crude, the American benchmark, traded near 92 dollars. Both are far above the 85 dollar third-quarter average that the US Energy Information Administration had forecast.
The trigger was a resumption of US and Iranian strikes in early September, the first exchange in about a month, after weeks in which markets had begun to hope a deal on reopening the Strait of Hormuz was within reach. Iranian missiles fired towards Kuwait on 3 September pushed Brent above 96 dollars in a single session. Israeli warnings that it would target Iranian military and civilian infrastructure added to the nerves.
The underlying supply picture is the reason prices are staying high rather than spiking and fading. Throughput through the Strait of Hormuz has fallen from 21.6 million barrels a day in the fourth quarter of 2025 to 4.9 million barrels a day in the second quarter of 2026, a drop of 77 percent. The strait is the channel through which roughly a fifth of the world seaborne oil normally passes, and there is no full-capacity alternative route.
Refined products have followed crude higher, which is why the effect is showing up in diesel and petrol costs across Europe rather than staying confined to the futures market.
Why it matters
Oil is the one commodity whose price shows up in almost every other price. It moves the cost of running a car, heating a home, flying, and shipping a container of goods from Asia to Felixstowe. It also feeds into the cost of fertiliser, plastics and asphalt. When crude rises 9 percent in a week, that pressure works its way through the economy over the following two to six months.
For Britain in particular, this is the main reason the inflation picture has turned. UK headline inflation rose to 2.9 percent in the year to July, the first increase since March, and the Bank of England has explicitly pointed to higher crude and refined product prices as the driver. An energy shock is the hardest kind of inflation for a central bank to handle, because raising interest rates does nothing to put more oil on the water.
It also reshapes who wins and who loses in markets. Energy producers such as Shell and BP see profits rise directly with the crude price, which is one reason the FTSE 100, with its heavy weighting to oil and mining, has held up better than many European indexes this year. Airlines, hauliers, chemical companies and anyone with a big fuel bill are on the other side of that trade.
Governments face a squeeze too. Higher fuel costs raise pressure for duty freezes and support packages at exactly the moment tax receipts from a slowing economy are under strain.
Explained simply
The Strait of Hormuz is the narrow neck of a very large funnel. Nothing has happened to the oil in the tank, but the neck has been pinched to a fifth of its width, and everything downstream is waiting.
The world is not short of oil in the ground. What it is short of is a way to move a specific and very large share of it from the Gulf to the buyers who need it. Around a fifth of all seaborne crude normally passes through a shipping lane that is about 21 miles wide at its narrowest point. Pipelines exist to bypass parts of it, but their combined capacity is a fraction of what the strait carries.
When traffic through that channel drops by three quarters, buyers who used to source cargoes from the Gulf have to bid for barrels from elsewhere, and there is not enough spare elsewhere to go around. Prices rise until enough buyers step back. That is the mechanism behind the move from the low 80s earlier this year to the mid 90s now.
Insurance is the quiet second factor. Every tanker crossing a war-risk zone pays a premium, and those premiums have multiplied. Shipowners who decide the premium is not worth it simply stop sailing, which tightens supply further even when no vessel is actually attacked.
The reason prices jump on news of strikes rather than drifting up smoothly is that traders are pricing probability, not current barrels. A missile exchange raises the odds that the neck of the funnel is pinched for another six months rather than another six weeks, and the price moves to reflect that shift in odds instantly.
What it means for you
At the pump, the rule of thumb is that a sustained 10 dollar rise in Brent adds roughly 6 pence a litre to UK petrol and diesel, arriving with a lag of about four to six weeks. Brent is around 12 dollars above where it sat in the spring, so drivers should expect forecourt prices to keep grinding higher into October. On a 55 litre tank, that is roughly 4 pounds more per fill.
On household energy bills, the link runs through gas rather than oil, but the two move together in a supply shock. The Ofgem price cap already rose in July, lifting the typical annual dual-fuel direct-debit bill by 221 pounds to 1,862 pounds. If crude stays near 96 dollars through the autumn, the next cap review is more likely to rise than fall. If you are on a variable tariff, it is worth checking whether a fixed deal is now available below your projected cap rate.
On investments, a FTSE 100 tracker gives you meaningful exposure to this. Around 12 to 14 percent of the index by weight sits in energy and it has been a significant contributor to returns this year. A global tracker gives you far less. This is not a reason to change your allocation, but it explains why a UK fund may be behaving differently from a world fund in your portfolio.
If you fly regularly, book earlier rather than later for winter travel. Jet fuel is the largest single controllable cost for an airline, and carriers typically pass sustained increases into fares within one to two booking seasons.
The bigger picture
Oil shocks driven by geopolitics have a long history of resolving faster than the market fears. The 1990 Gulf crisis, the 2011 Libyan disruption and the 2022 sanctions on Russian crude all produced sharp spikes that largely unwound within a year as supply rerouted. The EIA still forecasts an average Brent price well below current levels, which tells you the official view is that this is temporary.
The counter-argument is that the disruption has already lasted longer than most of those episodes, and 4.9 million barrels a day of lost throughput is a larger physical gap than the market has faced in decades. What to watch is not the headlines about strikes but the shipping data: if daily transits through Hormuz start climbing back towards 10 million barrels a day, prices will fall quickly. Until they do, the floor under crude stays high.
