Oil prices rose on Friday and steadied near a six-month high amid escalating tensions between Opec member Iran and the US, raising the prospect of a war between the two countries that could disrupt the flow of supplies into global markets.
Brent, the benchmark for two thirds of the world's oil, was up 0.6 per cent at 10.08am UAE time to $72.09 a barrel, while West Texas Intermediate, the gauge that tracks US crude, was trading 0.53 per cent higher at $66.78 a barrel.
Oil prices closed 2 per cent higher on Thursday to settle at their highest level in six months and a weekly gain is set to be posted amid rise in geopolitical tensions.
Oil prices are rising as “the market remained intensely focused on the risk of US strikes on Iran”, said Vandana Hari, chief executive of Singapore-based Vanda Insights.
The US and Iran are in a tense stand-off in the Middle East, with Washington demanding Tehran quickly reach an agreement on a deal for its nuclear programme.
US President Donald Trump has set a 10-day deadline for Tehran to strike a deal – “otherwise bad things” will happen, he warned on Thursday.
Iran also threated the US that it would respond “decisively and proportionately” to any military aggression, according to a letter sent by its UN mission to Secretary General Antonio Guterres.
The letter warned that “all bases, facilities and assets of the hostile force in the region would constitute legitimate targets” as part of what Tehran described as a defensive response under international law.
This came after Iran also closed parts of the strategic Strait of Hormuz for a few hours due to “security precautions” for shipping safety as Iran's Islamic Revolutionary Guard Corps (IRGC) conducted military drills in the crucial waterway in the Arabian Gulf.
About one-fifth of the world's total daily oil consumption, or about 20 million barrels, passes through the Strait of Hormuz, along with cargo to and from the Gulf states.
“The Energy Information Administration’s weekly report on Thursday lent additional support to prices, showing an unexpectedly large 16.79-million-barrel draw in total US oil stocks,” Ms Hari said.
