Oil prices climbed on Friday, with Brent crude approaching $114 a barrel, as escalating Middle East tensions overshadowed President Donald Trump's latest efforts to boost domestic production. The market's focus remained on potential supply disruptions rather than current fundamentals.
Brent crude futures for December delivery rose 0.4% to $113.64 a barrel, while West Texas Intermediate futures for December gained 0.56% to $100.02. Both benchmarks hovered near their highest levels since early May.
Prices initially dipped after Trump invoked a Cold War-era law to encourage US oil and gas production and refining, but the decline was short-lived as geopolitical concerns reasserted dominance.
Middle East tensions drive oil higher
The latest rally reflects growing worries about security risks across the region, including continued hostilities involving Saudi Arabia and Yemen's Houthi movement, as well as threats to shipping through the Strait of Hormuz. The Houthis struck several government sites in Riyadh, a Saudi Aramco facility in Yanbu, and two airports this week.
Reports that American diplomats and their families were being evacuated from Riyadh added to market concerns. Separately, reports indicated that the US and Israel were considering renewed military action against Iran after the November 3 US midterm elections.
The potential for further escalation has heightened concerns about the security of oil production, refining infrastructure, and shipping routes, even as crude flows through the region have shown resilience. Continued fighting between Russia and Ukraine has added another source of uncertainty for energy markets, with Kyiv signalling openness to a trilateral summit involving the US, but progress toward a peace agreement remains limited.
Trump seeks to boost domestic production
Oil prices initially declined after Trump determined that petroleum production and refining were essential to national defense. He also invoked provisions of the Defense Production Act, opening the door for financial incentives for activities related to oil and gas production. The measures are intended to expand domestic fuel supplies and help contain energy costs as the Middle East conflict disrupts global refining activity.
Trump is seeking to bring down fuel prices ahead of the November 3 midterm elections, with rising energy costs and inflation remaining important issues for voters. However, the latest policy measures have yet to displace geopolitical developments as the dominant influence on crude prices.
Trump has blamed Iran for attempting to push oil prices higher ahead of the elections. In a Truth Social post, he said Tehran was exaggerating reports of attacks and maritime threats, claiming that more oil was passing through the Strait of Hormuz than before the conflict. He also reiterated that Iran must not be allowed to obtain a nuclear weapon.
Analysts focus on potential supply disruptions
Analysts at ING said the latest rally was being driven primarily by concerns about future supply rather than current market fundamentals. In their Commodities Feed for Friday, Warren Patterson, head of commodities strategy at ING Think, and commodities strategist Ewa Manthey said front-month ICE Brent had settled about 4% higher on Thursday at just above $113 a barrel.
“The rally is being driven less by current fundamentals than by mounting supply concerns,” they said. “Markets are increasingly worried about renewed escalation in the Persian Gulf, a scenario that could threaten oil flows that have so far remained remarkably resilient.”
This article is for informational purposes only and does not constitute financial advice.
