Crude oil booked a second consecutive weekly gain on Friday after the United States threatened an indefinite naval blockade of Iran, and the official most responsible for the pressure campaign told television viewers he could not explain why the market was reacting at all.
Brent crude futures settled 18 cents higher at $93.96 a barrel, while US West Texas Intermediate rose 11 cents to $86.94. Friday's moves were small, but the week's were not: Brent accumulated gains of more than 5.8% and WTI climbed 4.8%, extending a rally that has now run two weeks as the prospect of a near-term Middle East settlement has faded.
"The Toughest Sanctions in History"
The escalation came directly from the Treasury Department. Secretary Scott Bessent said the United States would use sanctions and its naval presence to force the collapse of the Iranian regime. "We have the blockade and we are going to have the toughest sanctions in history," Bessent said.
He went further in an interview on Newsmax's "Rob Schmitt Tonight," promising additional measures within days. "Watch this space for more announcements coming next week because we are going to apply measures like have never been seen in the history of economic isolation of a country," Bessent said.
The Iran conflict is approaching its six-month mark. Traders read an indefinite blockade as a supply story rather than a diplomatic one, on the reasoning that a campaign designed to strangle Iranian exports also raises the risk of disruption to everyone else's shipments through the same waters.
The Treasury Secretary's Puzzlement
Bessent himself rejected that reading. In a separate CNBC interview, he said he did not know why crude had gained following the president's comments, arguing that "maximum economic pressure" made it "likely" there would be no return to large-scale military attacks. The implicit case is that sanctions substitute for bombs, and a market pricing supply risk has the causality backwards.
Analysts were not persuaded. "Higher oil prices are a natural result of the latest approach by the U.S., which implies little hope of a near-term resolution in the Middle East," said Bjarne Schieldrop, chief analyst for commodities at SEB Research.
Buybacks That Did Not Hold
Bessent had a second market problem this week. The Treasury doubled the size of its long-dated debt buyback operations from $2 billion to at least $4 billion apiece, an attempt to steady a long end that has been under sustained pressure. The relief lasted roughly a day. Yields on the 30-year security climbed to 5.25% following the announcement.
The rest of the curve was calmer. The 10-year Treasury yielded 4.69% and the two-year sat at 4.18%, leaving the long end conspicuously alone in its distress — the shape of a market worried about supply and term premium rather than about the next Fed move.
Metals Take the Other Side
Precious metals treated the week as confirmation. Comex gold rose 1.11% to $4,622.00 an ounce, holding above $4,500 and heading for a third straight weekly gain. Silver matched gold's pace, up nearly 4% on the week and more than 115% over the past year, supported by a softer dollar and volatility across currency and bond markets.
Equities shook off Thursday's selloff, with the Dow up 0.5%, the S&P 500 adding 0.4% and the Nasdaq Composite gaining 0.5%. But the week's real signal sat in oil and gold, both of which are pricing a conflict that Washington says is nearly won.
Sources: CNBC, Reuters, Bloomberg, OilPrice.com, SEB Research, Trading Economics