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Oil and gas prices edged lower after a week of sharp gains driven by attacks on Gulf energy infrastructure, while equities fell amid concerns over supply disruptions and inflation.
Global oil prices eased on Friday but remained elevated after a volatile week dominated by escalating conflict in the Middle East, while stock markets stayed under pressure as investors weighed the economic fallout.
Brent crude slipped by more than $1 to about $107 a barrel and US West Texas Intermediate fell to $93.8 at 8am UAE time, as traders assessed efforts by Washington and its allies to boost supply and secure shipping through the Strait of Hormuz, a vital route for roughly a fifth of global oil and gas flows.
The pullback followed a sharp rally earlier in the week, when prices surged to multiyear highs, briefly approaching $119 a barrel after Iran launched strikes on energy infrastructure across the Gulf in response to Israeli attacks on its own facilities.
Looking to ease soaring prices, the US said it may remove some sanctions on Iranian oil stranded at sea.
"We may unsanction the Iranian oil that's on the water. It's about 140 million barrels," said US Treasury Secretary Scott Bessent.
Meanwhile, geopolitical tensions continued to escalate. Prime Minister Benjamin Netanyahu said on Thursday that Israel will not target energy sites after its attack on Iran's South Pars - part of the world's largest natural gasfield - the day before sent oil and gas prices soaring.
Tehran warned it would respond forcefully to further attacks on its energy assets, underscoring the risk of further disruption.
The attacks which hit major oil and gas sites this week, including Qatar's Ras Laffan complex disrupted supplies of liquefied natural gas (LNG) and sent shock waves through global energy markets, with European gas prices jumping and fears of prolonged power cut intensifying.
QatarEnergy CEO Saad Al Kaabi said the conflict has already knocked out 17 per cent of its LNG export capacity with disruption lasting up to five years, he told Reuters on Thursday.
The conflict, now in its third week, has severely strained regional energy systems and raised concerns about the security of supply chains, particularly as Iran has demonstrated its ability to threaten infrastructure and shipping routes across the Gulf.
Markets have been especially sensitive to developments around the Strait of Hormuz, where tanker traffic has been disrupted and producers have been forced to cut output, pushing crude prices above $100 a barrel and fuelling expectations of sustained volatility.
Equity markets reflected the uncertainty. Wall Street fell sharply on Thursday, with the Dow Jones Industrial Average dropping more than 300 points, the S&P 500 losing nearly 1% and the Nasdaq declining over 1%, as rising oil prices stoked concerns about inflation and interest rates.
Global stocks have also come under pressure, with investors shifting into safer assets such as the dollar, despite slipping from multi-month highs this week, amid fears that higher energy costs could weigh on growth and delay central bank easing.
Traders are also no longer expecting a Federal Reserve rate cut this year, and the European Central Bank may need to have early talks about rate increases in April, according to Reuters sources.
Analysts warn that the destruction of energy infrastructure and continued disruption to supply could keep oil prices elevated, with some estimates suggesting crude could rise further if attacks intensify or exports through the Gulf are curtailed.
