Despite a reduced likelihood of U.S. military action against Iran, geopolitical supply risks remained the market's focal point, driving international oil prices up over 1% on Friday. Brent crude futures rose by $0.37, a gain of 0.58%, to settle at $64.13 per barrel. West Texas Intermediate (WTI) crude futures for February delivery increased by $0.25, or 0.42%, closing at $59.44 per barrel on the New York Mercantile Exchange. During Friday's session, Brent crude had surged by more than $1 at one point, as investors continued to assess the risk of potential supply disruptions should Middle East tensions escalate further. Giovanni Staunovo, an analyst at UBS, stated, "Although geopolitical tensions in the Middle East have eased somewhat, they have not completely vanished, and market participants remain concerned about potential supply disruptions." Earlier in the week, both major benchmark crude prices had hit multi-month highs due to protests in Iran and hints from U.S. President Donald Trump about potential military action. However, on Thursday, Trump's comments that Tehran's crackdown on protesters was moderating alleviated market fears of a military conflict that could disrupt oil supplies, causing prices to fall over 4% for the day. Analysts at Commerzbank noted in a report, "Above all, the market is concerned that Iran could block the Strait of Hormuz in the event of an escalation—a passage for about a quarter of the world's seaborne oil." "If signs of a sustained de-escalation of tensions in the region emerge, market attention may shift back to Venezuela. Recently sanctioned or frozen Venezuelan crude could gradually return to the global market." Meanwhile, analysts expect global oil supplies to increase this year, which could limit the premium that geopolitical risks add to oil prices. Priyanka Sachdeva, an analyst at Phillip Nova, said, "Despite persistent geopolitical risks and speculative sentiment on a macro level, the fundamentals still point to ample supply."
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