Synopsis

Brent crude futures gained $1.05, or about 1.25%, to $85.28 a barrel while U.S. West Texas Intermediate (WTI) crude futures rose $1.03, or 1.3%, to $79.98 a barrel. The gains helped both benchmarks recover losses from the previous session. For the week, both oil benchmarks have rallied nearly 12%. Brent is headed for a third straight weekly gain, while WTI is on course for its second consecutive week of advances.

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Oil prices edged higher on Friday as the conflict between the U.S. and Iran intensified across the Gulf, disrupting oil flows through the Strait of Hormuz.

Adding to supply concerns, Tehran has reportedly asked the Houthi movement to remain prepared to shut the Red Sea export route if the conflict escalates further.

Crude oil price on July 17

Brent crude futures gained $1.05, or about 1.25%, to $85.28 a barrel while U.S. West Texas Intermediate (WTI) crude futures rose $1.03, or 1.3%, to $79.98 a barrel. The gains helped both benchmarks recover losses from the previous session. For the week, both oil benchmarks have rallied nearly 12%. Brent is headed for a third straight weekly gain, while WTI is on course for its second consecutive week of advances.

The latest rise in prices comes after the U.S. resumed large-scale military action against Iran. For the first time since a memorandum of understanding paused hostilities last month, Washington carried out two major waves of air strikes on Wednesday, largely targeting areas near Iran's southern coast, and continued its attacks on Thursday.

Also read: Oil is crude once again! Is $95 the new normal and what it means for Indian investors?

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

According to a statement from the U.S. Central Command, American forces launched "a new wave of strikes against Iran for the sixth consecutive night to further degrade Iranian military capabilities".

Iran has responded with missile and drone attacks targeting U.S. military bases in neighbouring countries, including a barrage aimed at a recently expanded air base in Jordan.

Where are prices headed?

Goldman Sachs said Brent crude could rise above $110 per barrel in the fourth quarter if the recovery in Gulf exports remains delayed. However, the investment bank expects prices to retreat into the $60s by the end of the year if geopolitical tensions ease and production rebounds faster than expected.

"At the current point there are no signs of a ceasefire again. But in case there is a ceasefire immediately imposed, we don't expect Brent oil prices to fall beyond $70 per barrel. It is likely to remain the lower support for the near term," Pranav Mer, Senior Vice President, Currency and Commodity at JM Financial, told ETMarkets.

Read more: Oil's war premium makes a comeback with missiles

Anindya Banerjee, Head of Commodity Research at Kotak Securities, said oil has once again begun pricing in geopolitical risk. "Any strike on major Gulf export infrastructure could force a retest of $95-100 and beyond," Banerjee said.

Nuvama Institutional Equities warned that an extended closure of the Strait of Hormuz could disrupt nearly 20 million barrels per day of crude oil flows. Under such a scenario, oil prices could climb to between $110 and $150 per barrel.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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