Oil Prices Rise Amid Middle East Conflict Concerns
Oil prices surged on Friday as tensions in the Middle East escalated, raising concerns about potential supply disruptions in the oil-rich region.
By 09:30 ET (13.30 GMT), crude oil futures traded 1% higher at $84.03 a barrel, while the Brent contract climbed 0.8% to $88.66 a barrel.
Crude Rises Following U.S. Airstrikes
The crude benchmarks experienced a significant increase on Friday after the Pentagon confirmed that the U.S. had launched strikes on two facilities in eastern Syria. These facilities were allegedly used by Iran’s Islamic Revolutionary Guard Corps.
The U.S. justified the attacks as a response to recent attacks on U.S. troops in Iraq and Syria. However, the Iranian Foreign Minister, Hossein Amirabdollahian, warned the United States that they will “not be spared from this fire”.
Meanwhile, Israeli forces carried out an overnight raid on northern Gaza, and Prime Minister Benjamin Netanyahu reiterated his commitment to a larger ground assault on the region.
This escalation has raised fears of potential disruptions in oil exports not only from major crude producer Iran, which supports Hamas, but also from Saudi Arabia, the largest oil exporter in the world.
Weekly Losses Loom
Despite the recent surge, the crude benchmarks are on track for heavy losses this week. The Brent contract is currently down 3.2%, and the Nymex contract is 4.9% lower.
Traders have struggled to assess the extent to which the conflict would disrupt oil supplies, as crude shipments from the Middle East remained relatively stable during the first 20 days of the conflict.
Moreover, concerns are growing about future oil demand from Europe, a major crude consumer. The European Central Bank (ECB) left interest rates unchanged on Thursday, breaking a streak of 10 consecutive rate hikes. ECB President Christine Lagarde stated that “the euro area economy remains weak.”
Dollar Strength Weighs on Crude Ahead of Fed Meeting
Additionally, the strength of the dollar ahead of the upcoming Federal Reserve meeting has put pressure on oil markets. While it is widely expected that the central bank will keep rates on hold, Fed officials have hinted at the possibility of higher rates in the coming year, potentially impacting crude demand.
Data released on Thursday showed that the U.S. economy grew more than expected in the third quarter, and the personal consumption expenditures price index (PCE), the Fed’s preferred measure of inflation, rose 0.3% in September.
The week concludes with the weekly oil rig count and other relevant data.
