Escalating tensions between the United States and Iran have prompted investors to assess geopolitical supply risks, pushing oil prices higher on Friday.
The Iranian government has stated that if the Trump administration proceeds with plans to strike key Iranian infrastructure, Iran will retaliate by targeting infrastructure across the Middle East.
Persistent and intensifying US-Iran tensions, coupled with Iran's stern warning of retaliatory strikes on regional infrastructure if the US targets its core facilities, spurred a rise in international oil prices on Friday due to supply risk concerns.
The international benchmark, Brent crude for September delivery, rose 0.7% to $84.79 per barrel, paring some of its earlier intraday gains.
US West Texas Intermediate (WTI) crude for August delivery climbed 1.1% to $79.78 per barrel; this contract settled at its highest level since June 15 on Thursday.
Both major crude benchmarks have gained over 11% this week, on track for their best weekly performance since late April.
The US Central Command reported overnight that US forces have conducted airstrikes against Iran for a sixth consecutive night, hitting dozens of military targets, including logistics facilities and maritime warfare equipment.
In a social media post, Central Command stated that over 50,000 US troops are deployed across the Middle East and that forces are "alert, combat-ready, and prepared to respond."
Brent crude for September delivery earlier advanced as much as 0.9% to $85.01 per barrel before retreating to trim its gains.
The fragile ceasefire agreement reached last month has now broken down, reigniting the US-Iran standoff and once again disrupting crude shipments through the strategically vital Strait of Hormuz. Approximately 20% of the world's seaborne oil trade passes through this chokepoint.
In a Tuesday interview with Fox News, former President Trump stated that if diplomatic talks with Iran fail to yield a breakthrough, US forces would strike Iranian infrastructure next week.
A spokesperson for Iran's top military command issued a strong response via Telegram on Thursday, warning that if the US carries out its threat, "all existing intact facilities in the Middle East, the entire region's infrastructure, will be destroyed."
Citing three anonymous sources on Thursday, Reuters reported that Iran has instructed Yemen's Houthi rebels to be prepared to block Red Sea oil shipping lanes immediately if the US strikes Iranian power infrastructure. The authenticity of this report could not be independently verified.
In a research note published Friday, Jorge Leon, Senior Vice President at energy consultancy Rystad Energy, stated that the firm's base case still anticipates a limited agreement between the US and Iran, but market confidence in this optimistic outcome has waned.
He added that both sides have strong economic incentives to avoid a complete breakdown in talks: the US wants lower oil prices ahead of the November midterm elections, and Iran is reluctant to forfeit associated economic benefits.
"The package of economic benefits currently on the table for Iran includes the unfreezing of overseas assets and crude export exemptions, which Iran is unwilling to permanently abandon," Leon said.
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