Oil prices climbed Friday following reports that Iran may be planning an attack on Israel through its allied militias in Iraq, though the gains were tempered as markets remain skeptical about a potential impact on oil supplies. West Texas Intermediate (WTI) crude rose up to 3.2% during the session before settling at a modest 0.3% increase, trading just below $70 per barrel. Brent crude, the global benchmark, ended the day 0.4% higher, closing near $73.
Despite the uptick on Friday, oil prices still posted a weekly decline of 3.2%. The pullback followed recent attacks by Israel on Iran, which led some traders to scale back concerns over potential disruptions to the region’s energy infrastructure. While oil prices plunged sharply earlier in the week, analysts caution that the market may have “relaxed too quickly,” resulting in futures regaining some ground in recent days. Options markets also showed signs that traders are once again willing to pay higher premiums for bullish call options on oil.
A Thursday report by Axios, citing unnamed Israeli sources, suggested that Iran is preparing to launch an attack on Israel through proxy militias in Iraq using drones and ballistic missiles. While the report initially led to a spike in oil futures, prices soon stabilized as traders questioned the likelihood and potential scale of further escalations in the conflict.
The regional tension underscores a delicate balancing act, with Israel and Iran engaging in what some analysts call a “quasi-choreographed” standoff. Pavel Molchanov, an analyst at Raymond James & Associates Inc., noted that both nations are aiming to appear strong without igniting an all-out conflict, although “day-to-day headlines surrounding the Middle East remain significant for the oil market.”
Market gains were also limited by recent U.S. labor data indicating fewer job additions than expected in October, though the figures were impacted by weather events and labor strikes.
Meanwhile, other developments may continue to shape oil markets in the weeks ahead. China’s National People’s Congress meets next week, while OPEC+ is set to decide whether to increase production in December. U.S. production levels are also drawing attention; Macquarie analysts noted that some market participants are underestimating recent increases in U.S. output, which reached record highs in August.
Signs of economic stabilization from China further influenced the market. China’s manufacturing activity unexpectedly rebounded in October, supported by government stimulus measures. Residential property sales in China also rose year-on-year for the first time in 2024, signaling renewed confidence amid the country’s economic recovery efforts.
