Oil prices surged on Friday as escalating tensions between the U.S. and Iran disrupted global energy markets. The U.S. launched multiple waves of air strikes against Iranian military targets, marking the first such attacks since a June truce. Iran retaliated with missile and drone strikes on U.S. allies in the region, while threatening to close the Red Sea export route if further U.S. strikes occur.
Brent crude futures rose 1.25% to $85.28 a barrel, while U.S. West Texas Intermediate (WTI) futures climbed 1.3% to $79.98 a barrel. Both benchmarks have gained nearly 12% this week, with Brent on track for a third consecutive weekly gain and WTI for a second.
The International Energy Agency (IEA) warned that oil security remains a critical issue, with Executive Director Fatih Birol expressing concern over the situation's potential impact on global markets. The U.S. Central Command confirmed ongoing strikes to degrade Iranian military capabilities, while Iran's leadership instructed its Houthi allies to prepare to close the Red Sea route if U.S. strikes target Iranian infrastructure.
China's role in mitigating oil price spikes has been notable, as its strategic petroleum reserves have allowed it to reduce imports amid rising prices. However, experts warn that a sudden increase in Chinese demand could amplify price surges. Meanwhile, U.S. President Donald Trump threatened to target Iran's critical infrastructure unless diplomatic breakthroughs occur, prompting Iran to vow retaliation against regional infrastructure.
Market analysts note that while a limited agreement between the U.S. and Iran remains possible, confidence in such an outcome has weakened. Both sides have economic incentives to avoid a complete breakdown in talks, with the U.S. seeking lower oil prices ahead of midterm elections and Iran reluctant to forgo economic incentives.