Crude oil prices are on the cusp of a full recovery, poised for a third consecutive daily gain on Friday, as geopolitical tensions in the Middle East escalate. The market is reacting to reports of potential Iranian retaliation against Israel, coupled with the intensifying conflict in Gaza.
According to Axios, citing Israeli intelligence sources, Iran is reportedly preparing a major retaliatory strike against Israel within days, possibly involving numerous drones and ballistic missiles launched from Iraq. While U.S. officials remain uncertain about Iran’s final decision to act, the intelligence report has sent shockwaves through the market.
The escalating tension in the Middle East comes as the conflict in Gaza intensifies. Israeli airstrikes in Gaza have killed over 60 Palestinians in the past day, according to local medical sources. The strikes have also reached the southern suburbs of Beirut, adding another layer of complexity to the situation.
Amidst the heightened tensions, diplomatic efforts led by the United States have struggled to make any significant progress in resolving the conflict.
The market is responding to these events with a surge in oil prices. West Texas Intermediate (WTI) crude, tracked by the United States Oil Fund (USO), rose 2.4% on Friday, reaching $71 per barrel, marking three days of upward momentum. Since Wednesday, oil prices have rebounded by over 5%, nearly erasing the declines seen earlier in the week that were fueled by subdued attacks from Israel to Tehran.
The surge in oil prices is also reflected in the performance of U.S. energy stocks. The Energy Select Sector SPDR Fund (XLE) climbed 1%, driven by strong earnings reports from ExxonMobil Corp (XOM) and Chevron Corp (CVX). While both oil giants exceeded earnings estimates, Exxon’s revenue fell short of expectations.
The heightened geopolitical tensions in the Middle East and the volatile situation in Gaza are likely to continue to influence oil prices and the broader energy market in the coming days. Investors will be closely watching developments in the region and the response from the international community as the situation unfolds.
