Oil Prices Rise Amid Middle East Tensions
Oil prices surged on Friday as tensions in the Middle East heightened, increasing the risk of supply disruptions from the oil-producing region. Despite the increase, prices are facing weekly losses due to expectations of fewer US interest rate cuts this year, according to Reuters.
Market Movement
Brent crude futures saw a 0.84 percent increase, climbing 75 cents to reach $90.49 a barrel by 9:30 a.m. Saudi time. Meanwhile, US West Texas Intermediate crude futures rose 1.02 percent, or 87 cents, to $85.89, erasing losses from the previous session.
Escalating Tensions
Suspected Israeli warplanes bombed Iran’s embassy in Damascus, prompting Iran to vow revenge and escalating tensions in the already strained region. While Israel has not claimed responsibility, Iran’s supreme leader has called for punishment.
Geopolitical Risks and Market Outlook
Geopolitical risks remain high, with oil prices up nearly 19 percent due to improving economic conditions and supply cuts by OPEC+. Despite this, oil prices are set for weekly declines as Brent and WTI are on track for a 1 percent drop as of 9:30 a.m. Saudi time on Friday.
Global Economic Conditions
In Europe, central bankers left policy rates unchanged but hinted at potential rate cuts in the near future. Conversely, Federal Reserve officials in the US signaled a cautious approach to interest rate cuts due to concerns about US inflation.
Market Forecast
Analysts at ING anticipate a possible pullback in oil prices if there is no further escalation in the Middle East or supply disruptions. They maintain a forecast for Brent to average $87 a barrel over the second quarter of the year, in line with expectations from OPEC’s latest monthly market report.