Oil was on pace to gain 9% in what would amount to its biggest weekly increase in more than a year over concerns that Israel could target Iran’s crude facilities in response to Tehran’s recent missile assault.
West Texas Intermediate futures (CL=F) extended gains midday to hover above $74 per barrel, while Brent (BZ=F), the international benchmark price, advanced nearly 1% to trade above $78.
Friday’s moves come after a more than 5% spike on Thursday when President Biden commented on the possibility of an attack on Iran’s petroleum infrastructure, which currently accounts for more than 3 million barrels of crude per day.
When asked whether he’d support targeting oil facilities, Biden responded, “We’re discussing that.”
Later in the day, a Pentagon spokesperson said during a briefing the US was talking with Israel about “what a response to Iran would look like” but declined to give further details on any targets.
Analysts at JPMorgan believe the White House will want to avoid higher oil prices given the US elections are just a month away and that it’s unlikely it would favor an attack on Iranian petroleum facilities.
“Hence, we assume it will not be Israel’s preferred course of action, but rather a secondary or even tertiary response to Iran’s possible escalation,” JPMorgan analysts Natasha Kaneva and Prateek Kedia wrote in a note on Friday.
Concerns over possible interruptions along the Strait of Hormuz in the Middle East, a chokepoint for oil shipments, have also sent prices higher.
“If there’s a stranglehold there, and there’s a serious blockage or serious delays, we should clear $80 [Brent]. That is going to push oil prices significantly higher. That is a game changer,” Blue Line Futures founder Bill Baruch told Yahoo Finance this week.
Futures spiked higher on Tuesday after Iran fired about 200 ballistic missiles in response to Israeli ground raids in southern Lebanon targeting Iranian-backed militants.
“Positioning in crude leading up into these events was very short and much of this [week’s] move has been shorts covering and not necessarily investors betting that crude continues to rally,” Rebecca Babin, US senior energy trader at CIBC Private Wealth, told Yahoo Finance on Friday.
Despite this week’s move higher, spare capacity from oil alliance OPEC+ could be keeping prices relatively contained.
Last week, the futures market slumped following a report that Saudia Arabia, the leader of the Organization of the Petroleum Exporting Countries, is determined to start unwinding voluntary production cuts later this year, even if it leads to lower crude prices.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.
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