Oil prices climbed to their highest in five months in Asian trade on Friday and were on track for a bumper week in two months as geopolitical tensions between Israel and Iran continue to intensify.
Brent crude oil futures expiring in June were up 0.40% to $91.02 per barrel, their highest since October, before settling 0.45% higher at $91.06 per barrel. Same-month contract US West Texas Intermediate (WTI) crude futures also rose 0.28% to $86.83 per barrel.
The gains came as concerns over a wider regional war due to the growing Israel-Iran conflict signaled further supply disruptions in the oil-rich region of the Middle East, reinforcing views of tighter crude markets in the coming months.
The outlook was further supported by the Organization of Petroleum Exporting Countries (OPEC) and members leaving the existing output cut policy unchanged on Wednesday.
The demand scenario for crude also turned better as upbeat economic data from China raised expectations for more robust imports in the world’s largest oil importer this year.
Israel-Iran Conflict Boosts Oil, Tighter Outlook Aids Surge
The global and US oil benchmarks are seen heading towards gains between 4.50% and 5.00% this week, which would mark their best performance since February.
Crude prices were primarily driven by the potential involvement of Iran, OPEC’s third-largest producer, in the fight between Israel and Palestinian rebel group Hamas after Tehran vowed to retaliate against an alleged Israeli attack on an embassy in Damascus, Syria, which killed Iranian generals this week.
Israel Prime Minister Benjamin Netanyahu has condemned such actions, stating that the country would defend itself and “harm” wrongdoers. The US has urged a ceasefire, although the call seemed to have been ineffective.
Iranian sources have stated that Tehran’s response would be carefully assessed to prevent further escalation of conflict.
Increased geopolitical tensions in the Middle East risk disrupting oil production in the region, especially if Iran officially joins the fight.
Hopes of tighter global supplies in the coming months also aided oil prices as Russia trims output following Ukraine’s series of drone strikes on some of its major refineries.
The reduction, plus the OPEC+ alliance keeping their current production cuts, has strengthened the outlook for fewer crude inventories. US gasoline stockpiles falling sharply to 4.26 million barrels in the week ending March 29 also pointed to growing demand in the top fuel consumer.
Traders now await the release of the US nonfarm payrolls report later Friday for further hints on the condition of the world’s largest economy.
