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Oil prices rose on Friday but were still headed for a weekly loss after the US carried out strikes against two Iranian-linked sites in Syria, stoking concerns that the Israel-Gaza war will escalate into a broader conflict.
Brent, the benchmark for two thirds of the world’s oil, was trading 1.88 per cent higher at $89.65 a barrel at 9.38pm UAE time while West Texas Intermediate, the gauge that tracks US crude, was up 1.83 per cent at $84.73 a barrel.
On Thursday, Brent closed 2.44 per cent lower at $87.93 a barrel while WTI closed 2.55 per cent down at $83.21.
The US military conducted strikes against two sites in eastern Syria used by Iran's Islamic Revolutionary Guard Corps and groups it backs, in response to a spate of attacks against American forces in both Iraq and Syria.
The Pentagon has said that around 900 more US troops are heading to the Middle East or have just arrived there to bolster air defence amid a surge in attacks in the region.
Brent crude has risen by about 6 per cent since October 7 when Hamas, which rules Gaza, attacked southern Israel, killing about 1,400 people, and taking more than 200 hostages.
Israel has retaliated with air strikes and total siege of the Palestinian enclave, with the death toll exceeding 7,000.
“Traders are concerned that the violence could intensify and spread, possibly pulling in state actors and threatening oil supply,” said James Reeve, chief economist at Jadwa Investment.
“We think these fears are overdone, but appreciate that miscalculation or overreach by one or more of the parties involved could see containment unravel very quickly,” Mr Reeve said in a research note.
Oil prices of more than $100 a barrel could tip the global economy into a recession, he added.
The Israel-Gaza war will result in more economic jitters for an “already anxious world”, Kristalina Georgieva, managing director of the International Monetary Fund, said during the Future Investment Initiative in Riyadh this week.
The war is happening at a time when “growth is slow, interest rates are high, [and] the cost of servicing debt has gone up”, Ms Georgieva said.
Earlier this month, the IMF kept its global economic growth projection for this year at 3 per cent, slower than the 3.5 per cent expansion recorded in 2022, remaining below the historical growth average.
For 2024, the fund expects the global gross domestic product to expand by 2.9 per cent, a 0.1 percentage point downgrade from the fund’s forecast in July for next year.