Oil prices rose on Friday as rising tensions in the Middle East raised the risk of supply disruptions, but prices are poised for weekly losses on expectations of fewer U.S. interest rate cuts this year.
Brent crude futures were up 75 cents, or 0.84%, at $90.49 a barrel by 0630 GMT, while WTI crude futures were up 87 cents, or 1.02%, at $85.89.
Oil prices are still poised for weekly declines, with Brent and WTI heading for a decline of around 1% on Friday.
The gains pared losses from the previous session, which was dominated by concerns about persistent U.S. inflation that dampened hopes for a rate cut in early June.
With the attack by Israeli planes in Damascus, for which Iran promised revenge, tension increased in the region, which was already tense due to the Gaza war.
Israel has not said it was responsible, but Iran’s supreme leader Ayatollah Ali Khamenei said on Wednesday that Israel would be punished for the attack.
However, Iranian sources said Tehran had signaled a response aimed at avoiding a major escalation. The United States expects Iran to launch an attack on Israel, but it would not be large enough to drag Washington into war, according to a US official.
Netanyahu said on Thursday that Israel is continuing its war in Gaza but is also prepared for other scenarios in the area.
Geopolitical risks remain high and oil prices have risen by almost 19%, supported by improving economic conditions and supply cuts by OPEC+ allies.
In Europe, where the labor market has begun to soften and growth has stagnated, central bankers kept the policy rate unchanged on Thursday, but signaled that they will continue to cut interest rates in June.
The European Central Bank’s decision to keep policy rates unchanged was expected, but the accompanying statements open the door to short-term monetary expansion.
But in the US, Fed officials signaled on Thursday that there would be no rush to cut interest rates as persistent US inflation continues to cause concern.
However, the rise in oil is expected to recede unless there is a further rise or supply disruption in the Middle East. OPEC’s latest monthly market report is also in line with expectations.
