Oil prices surged more than 8 percent on Friday, hitting their highest in almost five months as tensions in the Middle East escalated, raising worries about disrupted oil supplies.
As of 5:00 GMT, Brent crude futures gained $5.74, or 8.28 percent, to $75.10 a barrel after hitting an intraday high of $78.50, the highest since January 27. Meanwhile, U.S. West Texas Intermediate crude was up $5.85, or 8.60 percent, at $73.89 a barrel after hitting a high of $77.62, the highest level since January 21.
Mideast tensions raise supply risks
Oil prices’ gains on Friday were the largest intraday rises for both contracts since 2022 after Russia invaded Ukraine, causing energy prices to spike. Israel said it targeted Iran’s nuclear facilities, ballistic missile factories and military commanders on Friday, marking the start of what it warned would be a prolonged operation to prevent Tehran from building an atomic weapon.
The latest developments in the region have elevated geopolitical uncertainty significantly, which requires the oil market to price in a larger risk premium for any potential supply disruptions. Oil traders said it was still too early to determine if the strike would impact Middle East oil shipments, as it will depend on how Iran responds and whether the U.S. will intervene.
Other analysts noted that conflict would need to escalate to the point of Iranian retaliation on oil infrastructure in the region before the oil supply is impacted.
In an extreme scenario, they noted, Iran could hinder up to 20 million barrels per day of oil supply through attacks on infrastructure or limiting passage through the Strait of Hormuz. The Strait is one of the world’s most important shipping routes, with about a fifth of the world’s oil passing through it.
Read: Dubai gold prices rise AED3.75, global rates hit near 2-month high on Middle East tensions
U.S. crude inventories fall as trade tensions ease
Further supporting the recent rally in oil prices, U.S. crude inventories fell 3.6 million barrels to 432.4 million barrels last week, the Energy Information Administration said.
In addition, President Trump said on Wednesday that a trade framework with China is “done,” subject to approval by him and President Xi Jinping. The deal grants China export licenses for rare earth minerals and magnets, while the U.S. will allow continued access for Chinese students. Washington will maintain a total tariff rate of 55 percent on Chinese imports, with China retaining a 10 percent tariff on American goods, Trump said in a social media post.
Trump added that he will send letters in the coming weeks to key trading partners, outlining “take it or leave it” tariff offers ahead of a July 9 deadline tied to his pause on sweeping “liberation day” tariffs. He said he is open to extending that deadline, but expects it won’t be necessary.
These developments reduced some uncertainty in global trade and improved the outlook for economic growth, which typically drives higher demand and prices for oil.
