Oil prices climb amid US-Iran tensions as markets brace for supply risks

Global oil prices moved higher on Friday and were set to post strong weekly gains as investors closely monitored escalating tensions between the United States and Iran,

LONDON: Global oil prices moved higher on Friday and were set to post strong weekly gains as investors closely monitored escalating tensions between the United States and Iran, raising fears of potential disruptions to energy supplies from the Middle East.

Brent crude futures advanced by 1.45%, reaching $88.33 per barrel, while US West Texas Intermediate (WTI) crude rose 1.26% to $82.27 a barrel. The gains came as diplomatic efforts aimed at easing regional conflict showed little progress, increasing uncertainty in global energy markets.

Market participants remained focused on reports that Washington could intensify economic pressure on Tehran, including the possibility of expanding maritime restrictions and tightening sanctions. Analysts said any further deterioration in relations between the two countries could have a significant impact on global crude exports, particularly given the Middle East’s critical role in oil production.

Energy analysts noted that concerns over supply interruptions have become a key driver of recent price movements. While no major disruption has yet occurred, traders are pricing in the risk that a broader conflict could affect shipping routes and regional oil infrastructure.

“Geopolitical developments continue to dominate market sentiment,” analysts said, adding that a major escalation could trigger a sharper increase in oil prices and add to inflationary pressures worldwide.

Meanwhile, economic data from the United States added another dimension to market activity. A survey released on Friday indicated that consumer sentiment weakened in early August as households faced higher living costs, partly linked to rising energy prices and global uncertainty.

US retail sales data also came in weaker than expected, leading investors to scale back expectations of another interest rate increase by the Federal Reserve next month. The softer economic outlook pushed the US dollar lower and reduced Treasury yields, offering support to commodities priced in dollars, including gold and oil.

Spot gold prices climbed 0.69% to $4,380.03 per ounce, while US gold futures settled 0.4% higher at $4,437.30 an ounce as investors sought safe-haven assets amid geopolitical concerns.

In currency markets, the Japanese yen strengthened slightly against the US dollar, trading near 159.37 per dollar. The movement followed reports that the Bank of Japan may consider raising interest rates as early as September. However, traders continued to watch the key 160-yen level, which could prompt intervention by Japanese authorities.

Global equity markets showed mixed performance. On Wall Street, technology stocks weighed on major indexes after recent gains. The Dow Jones Industrial Average slipped 73.41 points, while the S&P 500 and Nasdaq Composite also closed lower. Despite Friday’s decline, both the S&P 500 and Nasdaq remained on course for a third consecutive weekly gain.

European markets also ended lower, snapping a four-week winning streak as rising oil prices and geopolitical risks overshadowed generally positive corporate earnings.

MSCI’s global equity index edged down 0.09%, reflecting cautious investor sentiment, while Asia-Pacific shares outside Japan recorded modest gains.

Market strategists said investors are increasingly balancing optimism over corporate earnings and expectations of easier monetary policy against uncertainty surrounding international conflicts.

John Sidawi, Senior Portfolio Manager at Federated Hermes, observed that financial markets have recently shown resilience despite geopolitical shocks, but warned that this calm may not last indefinitely.

He noted that either a significant escalation in conflict or a clear diplomatic breakthrough could lead to a much stronger market reaction than current asset prices suggest.