Oil prices are heading toward $90 a barrel at the opening of trading this week on Monday, amid rising risks of escalating tensions between the United States and Iran, attacks on critical infrastructure, and the near halt of oil tanker traffic in the Strait of Hormuz. All these factors—from US forces bombing civilian infrastructure in Iran, to Tehran's attack on a power and desalination plant in Kuwait, repeated attacks on oil tankers in the Strait of Hormuz, and the potential extension of naval warfare to the Bab el-Mandeb Strait—point to a confirmed continuation of rising oil prices.

With oil transit through the Strait of Hormuz dropping to near zero, it may seem illogical to see any decline in Brent crude prices in particular, especially as Washington and Tehran abandon diplomacy. Moreover, the growing threats of closing vital energy corridors, whether through the Strait of Hormuz or the Red Sea, do not only mean a potential rise in oil prices but also a complete repricing of global inflation expectations.

Every sustained rise in energy prices directly impacts transportation, production, and supply chain costs, which could impose new inflationary pressures at a time when markets were betting just a few weeks ago on continued slowdown in US inflation.

Oil prices rose about 16% last week, marking the best performance for West Texas Intermediate crude since the start of the war with Iran. On Friday, oil prices recorded double-digit percentage gains for the week, with Brent crude futures, the global benchmark for oil, achieving their best performance since April, while US WTI crude futures recorded their best performance since the first week of the war in early March.

This rise is attributed to the escalation of fighting between the United States and Iran, with both sides exchanging retaliatory strikes continuously. Tehran announced that the US targeted infrastructure, including bridges, while media reports indicated that the Trump administration is considering and taking steps to prepare for a potential escalation of military operations in Iran. David Morrison, senior market analyst at Trade Nation, said: 'Brent crude has retraced about 50% of its decline from mid-May to its July low. So the key question now is whether the current stabilization around the 50% retracement level indicates that oil is gaining momentum for another upswing, or that upward momentum has faded and it is about to resume its decline?'

He added: 'Oil is no longer in oversold territory. In fact, the indicator has returned to neutral. Unfortunately, this does not help in forecasting the future direction of prices. Can the United States and Iran find common ground and resume peace negotiations seriously? Or will this war continue to drag on and negatively impact global markets?' Axios reported on Friday that Washington notified Israel it would send dozens of additional refueling aircraft to the country in anticipation of a possible expansion of military operations against Iran, citing three US and Israeli officials. Earlier in the week, reports mentioned that expansion options include sending ground troops to seize Iranian islands near the Strait of Hormuz.

Meanwhile, the US military continued its relentless bombing of Iran with a new round of strikes for the seventh consecutive night. US Central Command announced that it successfully destroyed a control tower at an Iranian port that had been 'used for decades' to track and target commercial vessels transiting the strait.

Iranian state media reported that US attacks targeted five bridges around Bandar Abbas. President Donald Trump vowed to attack Iranian infrastructure if Tehran does not come to the negotiating table.

The battles have negatively impacted navigation through the strait. Before the war, this vital waterway served as a conduit for transporting a fifth of global oil and gas flows. Ship tracking firm Kepler said: 'Navigation in the Strait of Hormuz continued to decline on Thursday, with confirmed transits dropping to eight, the lowest in three weeks. Seven of these eight transits took the Iranian route, highlighting the increasing concentration of traffic through high-risk corridors as operators reassess security, crew safety, and insurance risks.'

The United States also resumed its naval blockade on ships entering and leaving Iranian ports, raising concerns about supply disruptions. In a notable step, Iraq and Syria announced on Friday their intention to rehabilitate and rebuild a crude oil pipeline that bypasses the strait.

The US State Department said in a statement: 'The United States welcomes the participation of an American-led international coalition to implement the technical and financial aspects of this project. After rehabilitation, this flagship project will have an initial transport capacity of two million barrels of crude oil per day.' This announcement coincides with Iraqi Prime Minister Ali al-Zaidi's visit to the United States this week, where he met President Trump at the White House on Wednesday.

Meanwhile, reports indicated that the Iraqi president also visited Chevron's headquarters on Thursday, and the American oil giant will sign memorandums of understanding with the Iraqi government to enhance its entry into the West Qurna 2 and Nasiriyah oil fields.

In related news, US inventory data released this week pointed to a tightening in the crude oil market. The US Energy Information Administration announced that US crude oil inventories fell by 1.7 million barrels in the week ending July 10, reaching 409.7 million barrels, while gasoline inventories decreased by 1.5 million barrels.

Earlier in the week, industry data from the American Petroleum Institute showed that US crude oil inventories fell by about 564,000 barrels over the same period, a smaller decline than analysts had expected.

On the other hand, China's crude oil purchases fell 41% year-on-year in June to 7.12 million barrels per day, the lowest monthly level since October 2016, as the Gulf war disrupted supplies from the Middle East and weak domestic demand limited purchases by the world's largest oil importer.

In developments affecting oil market movements, the US military redirected two commercial vessels since reimposing its naval blockade on Iranian ports, resuming an enforcement campaign that diverted 140 ships and disrupted nine others between April and June, but it did not fully stop Iranian crude oil shipments.

On the other hand, Iraq briefly suspended crude oil shipments after a suspected drone approached an oil tanker in Basra, although operations later resumed without any reported damage, while security threats forced the Khor Mor gas field to halt operations, causing a 2.5 GW disruption in energy supplies in Kurdistan.