Oil Prices Rise Above $85 as U.S.-Iran Hostilities Threaten Key Supply Routes

Oil prices climbed on Friday, erasing earlier losses, as intensifying military exchanges between the United States and Iran raised concerns over crude supply from the Middle East. The conflict has heightened the risk of disruption to major shipping lanes, including the Strait of Hormuz and the Red Sea.

Market Reaction

By 0118 GMT, Brent crude futures had risen $1.05, or about 1.25%, to trade at $85.28 a barrel. U.S. West Texas Intermediate (WTI) futures increased $1.03, or 1.3%, to $79.98 a barrel.

Both benchmark contracts are on track for significant weekly gains of nearly 12%. This would mark the third consecutive weekly increase for Brent and the second for WTI, reflecting growing geopolitical risk premiums in the market.

Escalating Hostilities

The price surge follows renewed military action, breaking a truce that had been in place for a month. U.S. Central Command confirmed in a statement that its forces initiated "a new wave of strikes against Iran for the sixth consecutive night to further degrade Iranian military capabilities."

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Tehran has retaliated with missile and drone attacks on U.S. military installations in neighboring countries. The direct conflict is already limiting oil flows out of the crucial Strait of Hormuz, a primary artery for global oil shipments.

Supply Disruption Fears

Adding to supply anxieties, three sources reported to Reuters that Iran's leadership has instructed its Houthi allies to prepare for a potential closure of the Red Sea oil route if U.S. strikes target Iranian power infrastructure.

Fatih Birol, Executive Director of the International Energy Agency (IEA), highlighted the precarious situation at a Council on Foreign Relations event on Thursday. "Oil security is still a critical issue," Birol said. "We should be worried, and I am worried, if the situation does not improve in the next few weeks."