Oil prices surge as Middle East tensions raise supply concerns

Oil prices climbed sharply on Friday, with Brent crude reaching its highest settlement in nearly six months as Houthi attacks in Saudi Arabia and a reported oil spill in the United Arab Emirates raised concerns about potential disruptions to Middle Eastern energy supplies.

Brent crude futures rose $3.55, or 3.14%, to settle at $116.72 per barrel, marking their highest closing price since April 29. Meanwhile, US West Texas Intermediate (WTI) crude gained $3.80, or 3.8%, to finish at $103.27 per barrel.

For the week, Brent crude advanced 6%, outperforming WTI, which recorded a 2.3% increase. The gains reflected growing concerns among investors about regional instability and its potential impact on global oil production, transportation and exports.

The attacks in Saudi Arabia heightened fears about the security of critical energy infrastructure, while the reported oil spill in the UAE added to concerns about possible supply disruptions. Investors are closely monitoring developments across the region because of its importance to international energy markets.

The rally in oil prices also boosted energy stocks on Wall Street. The US energy sector gained 2.5% on Friday, reaching a record high despite declines across major stock market indexes.

The Dow Jones Industrial Average dropped 652.82 points, or 1.23%, to close at 52,215.16. The S&P 500 fell 39.75 points, or 0.52%, to 7,623.68, while the Nasdaq Composite declined 53.52 points, or 0.21%, to finish at 25,955.34.

On a weekly basis, the S&P 500 lost 0.5%, while the Nasdaq declined 0.7%. In contrast, the Dow advanced 0.4%, extending its weekly winning streak to three consecutive weeks.

Investors also remained concerned about the technology sector, particularly the sustainability of substantial spending on artificial intelligence. Semiconductor stocks recovered modestly on Friday, with the Philadelphia Semiconductor Index rising 0.4% after experiencing its steepest daily percentage decline since June a day earlier.

The S&P 500 technology index also gained 0.4%, although performances varied among major companies. Meta Platforms shares fell 1%, while Microsoft advanced 0.7%. Alphabet and Amazon recorded slight declines.

Questions about the profitability of artificial intelligence investments resurfaced following a report involving Meta, prompting investors to reassess the potential returns from the technology. Attention is now turning to upcoming earnings reports from Alphabet, Microsoft and Amazon, with their financial performance and future spending plans expected to influence market sentiment.

Other corporate developments contributed to the cautious mood. American Express shares declined 3.7% following its quarterly results, as its chief executive highlighted the need to make the company more agile and efficient.

Telecommunications stocks also faced pressure after reports emerged that SpaceX was discussing a potential wireless carrier programme in the United States with cellular infrastructure companies, raising concerns about increased competition.

Meanwhile, US Treasury yields moved higher after the benchmark 10-year yield recorded its largest one-day decline in nearly four years on Thursday. The 10-year Treasury yield rose 3.7 basis points to 4.99%, remaining just below the psychologically significant 5% level. Persistent inflation pressures continued to concern investors.

European markets also weakened, with the pan-European STOXX 600 falling 0.31% to 635.77 points. The index declined approximately 1.4% over the week, recording its sharpest weekly drop since early September.

The euro slipped 0.21% to $1.1191 amid concerns about political instability and budget challenges in France. Although French government bond yields declined on Friday, they remained significantly higher for the week, while the country’s debt risk premium reached its highest level since the eurozone sovereign debt crisis in 2011.

Looking ahead, investors are expected to focus on developments in the Middle East, upcoming corporate earnings and persistent inflation concerns as they assess the outlook for global energy prices and financial markets.