Oil prices saw a slight increase in Asian trade on Friday as tensions in the Middle East intensified and U.S. jobs data provided a boost to demand outlooks.
Brent crude oil, against which crude oil is priced, rose by 9 cents to $79.25 per barrel, while U.S. West Texas Intermediate (WTI) crude oil gained 12 cents to $76.31 per barrel.
Both benchmarks are on track for a weekly gain of over 3%, reflecting the markets’ reaction to evolving global events.
The primary driver of the recent rise in oil prices has been the growing geopolitical instability in the Middle East.
Israeli forces have escalated airstrikes across the Gaza Strip, resulting in significant casualties and raising fears of a broader conflict in the region.
The ongoing battle between Israel and Hamas-led militants, coupled with the killing of senior figures from militant groups Hamas and Hezbollah, has heightened concerns about potential retaliatory actions by Iran.
These developments have stoked fears of disruptions in oil supplies from one of the world’s most crucial producing regions.
Iran-aligned Houthi militants have also been active, continuing their attacks on international shipping near Yemen in solidarity with the Palestinians in the conflict between Israel and Hamas.
The situation has prompted the United Kingdom Maritime Trade Operations (UKMTO) agency to report incidents near the coast of Mokha, Yemen, further underscoring the risks to oil transport routes.
Adding to the supply concerns, Libya’s National Oil Corporation declared force majeure at its Sharara oilfield, one of the country’s largest, following protests that have gradually reduced the field’s output.
The declaration of force majeure, which effectively suspends contractual obligations, highlights the fragility of oil supplies from the region.
In Saudi Arabia, the world’s largest oil exporter, King Salman has authorized the cabinet to convene in his absence and that of Crown Prince Mohammed bin Salman, amid concerns over his health following a lung inflammation treatment earlier this year.
The decision adds another layer of uncertainty to the region, as the 88-year-old king’s health issues could impact the country’s leadership and its influence on global oil markets.
Meanwhile, in the United States, investor sentiment was buoyed by positive jobs data. The latest figures showed a decline in new applications for unemployment benefits, which eased concerns about the health of the U.S. labor market and, by extension, the broader economy.
This data has tempered fears of an impending recession, providing some support to oil prices despite the usual inverse relationship between a stronger U.S. dollar and oil prices.
In China, consumer price index data for July showed no significant increase in consumer demand, despite efforts by the government to stimulate consumption.
While prices rose slightly faster than expected due to weather-related disruptions affecting food supplies, the lack of a strong demand signal from one of the world’s largest oil consumers remains a point of concern for the market.
As the week draws to a close, oil traders continue to weigh the impact of geopolitical risks against demand trends, with many expecting further volatility in the coming weeks.
The ongoing tensions in the Middle East, coupled with fluctuations in global economic indicators, are likely to keep oil prices on a knife’s edge as the markets navigate these uncertain times.
