(Investing) – Oil prices jumped almost 7% on Friday to multi-month highs after Israel launched strikes against Iran, sparking Iranian retaliation and raising worries about a disruption in Middle East oil supplies.
Brent crude futures were up $4.57, or around 6.59%, to $73.93 a barrel at 1352 GMT, after hitting an intraday high of $78.50, the highest since January 27.
U.S. West Texas Intermediate crude was up $4.53, or 6.66%, at $72.57, touching its highest since January 21 at $77.62 earlier in the session.
Friday’s gains were the largest intraday moves for both contracts since 2022, after Russia’s invasion of Ukraine caused a spike in energy prices.
Israel said it had targeted Iran’s nuclear facilities, ballistic missile factories and military commanders on Friday at the start of what it warned would be a prolonged operation to prevent Tehran from building an atomic weapon. Iran has promised a harsh response.
U.S. President Donald Trump urged Iran to make a deal over its nuclear programme, to put an end to the “next already planned attacks.”
The National Iranian Oil Refining and Distribution Company said oil refining and storage facilities had not been damaged and continued to operate.
The primary concern was whether the latest developments would affect the Strait of Hormuz, said SEB analyst Ole Hvalbye. The key waterway had been at risk of impact from increased regional volatility previously but had not been affected so far, Hvalbye said.
About a fifth of the world’s total oil consumption passes through the strait, or some 18 to 19 million barrels per day (bpd) of oil, condensate and fuel.
There also was no impact to oil flow in the region, he added.
“No energy installations have been impacted by the Israeli strikes, so unless Iran decides to drag other nations, especially the U.S. into the conflict, the risk of a supply disruption remains low and should over time reduce the risk premium,” Saxo Bank analyst Ole Hansen said.
Goldman Sachs in a note on Friday said while it has incorporated a higher geopolitical risk premium into its adjusted summer 2025 oil price outlook, it continues to assume no disruptions to Middle East oil supply after Israel’s attacks on Iran.
“The key question now is whether this oil rally will last longer than the weekend or a week – our signal is that there is a lower probability of a full-blown war, and the oil price rally will likely encounter resistance,” said Janiv Shah, analyst at Rystad.
“Fundamentals show nearly all Iranian exports going to China, so Chinese discounted purchases would be most at risk here. OPEC+ spare capacity can provide the stabilizing force,” he added.
In other markets, stocks dived and there was a rush to safe havens such as gold and the Swiss franc. [MKTS/GLOB]
