Oil rises on intensifying US-Iran hostilities and threat of Red Sea closure

Oil prices saw an uptick on Friday, driven by escalating military actions between the United States and Iran and the looming threat of the Red Sea export route being shut down. Brent crude futures increased by $1.05, or approximately 1.25%, to settle at $85.28 a barrel. U.S. West Texas Intermediate (WTI) futures also gained, rising $1.03, or 1.3%, to $79.98 a barrel, recovering from previous session losses.

This week has seen a significant climb in oil prices, with both benchmark contracts advancing nearly 12%. Brent crude is poised for its third consecutive weekly gain, while WTI is set for its second. The heightened tensions follow a period of fragile truce, with the U.S. launching two major waves of air strikes on Wednesday and continuing operations on Thursday, primarily targeting areas near Iran's southern coast.

Fatih Birol, Executive Director of the International Energy Agency, expressed concern over the situation, stating on Thursday, "Oil security is still a critical issue." He added, "We should be worried, and I am worried, if the situation does not improve in the next few weeks."

Adding to the supply concerns, Iran has reportedly instructed its Houthi allies to prepare to close the Red Sea oil route should the U.S. target Iranian power infrastructure. This development, coupled with Iran's retaliatory missile and drone strikes on U.S. military bases in neighboring countries, has intensified anxieties about potential disruptions to global oil flows.

Analysts at IG noted that WTI futures could potentially test the mid-$80s if the price holds above the key support level in the mid-$70s. In a separate development, Trump Media & Technology Group announced a new data feed service aimed at providing financial firms with rapid access to posts from influential social media accounts, including that of former President Donald Trump, whose posts have previously impacted oil markets.

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Oil security is still a critical issue. We should be worried, and I am worried, if the situation does not improve in the next few weeks.