Oil prices dipped roughly 3% during Friday morning trading, yet they remain on track for a weekly gain of about 10% amid escalating tensions between the US and Iran.
As of 6:25 AM Eastern Time, the global benchmark Brent crude futures for July delivery fell 3% to $97.72 per barrel, though they have increased by 10.9% for the week. Meanwhile, US West Texas Intermediate (WTI) crude futures dropped 2.8% to $89.59 per barrel, but have climbed 8.6% for the week.
Overnight, the US Central Command (Centcom) conducted its 13th consecutive night of strikes on Iran, targeting military command centers, drone storage facilities, communication networks, coastal surveillance sites, and maritime combat capabilities.
Centcom stated these strikes were designed to "further degrade the threat Iran poses to civilian and commercial vessels transiting the Strait of Hormuz."
"The international waterway remains navigable despite recent attacks by Iran's Islamic Revolutionary Guard Corps. Commercial vessels continue to transit freely with the support of US military forces," the military unit said in a statement. "There are currently over 50,000 US service members deployed across the Middle East."
President Donald Trump told Axios on Thursday that he is considering a "massive strike" on Iran, as the Middle East conflict expands to a new front in the Red Sea. The President indicated the proposed strike would be larger than any action taken since the war began, adding that Iran has "not been punished enough."
"I am considering a massive strike. Unprecedented. I'm about to make a decision. We have everything ready for it," he stated in the interview.
This follows Trump's earlier statement that he would hold Iran responsible for further attacks by the Houthi rebels, who are backed by Tehran and claimed responsibility for strikes on two Saudi Arabian oil tankers in Yemen.
"If they do it again, the United States will hold Iran responsible, because the Houthis are Iran's proxies/agent forces, and both Iran and the Houthis themselves will face significant military punishment," he posted on Truth Social.
According to Iranian state media, Iran's Revolutionary Guard stated on Thursday that it had attacked US military facilities at a US base in Jordan.
US Secretary of State Marco Rubio told reporters on Thursday that Trump's approach to handling the Iran war is "an eye for an eye, a tooth for a tooth."
Daniela Hathorn, senior market analyst at Capital.com, noted in a report on Friday morning that the escalating instability around key shipping routes has rebuilt a "significant geopolitical risk premium" in the oil market.
"Investor sentiment has been hit by ongoing shipping disruptions in the Red Sea, with attacks on commercial vessels intensifying concerns over global trade and energy security," she said. "Combined with tensions around the Strait of Hormuz, these developments reinforce the view that geopolitical risks are unlikely to fade in the near term, keeping energy markets tight and inflation risks elevated."
Meanwhile, Giovanni Staunovo, strategist at UBS Global Wealth Management, suggested in a report on Thursday that the market may be overestimating how quickly oil supply can recover from the conflict.
"We continue to expect the production recovery process in the Middle East to be slower than market expectations, as it requires an increase in inbound vessels," he stated. "As the conflict continues, these flows remain low. This will keep oil markets tight and prices supported."
UBS forecasts Brent crude oil prices will fall to $85 per barrel by the end of the year.
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