Oil rises towards $65 as Donald Trump warns Iran that US strikes are imminent

Any disruption to the transit of oil through the Strait of Hormuz would be extremely serious

FILE - In this June 11, 2019, file photo a pump jack operates in an oil field in the Permian Basin in Texas. Energy stocks slipped on falling oil prices during the second quarter as global demand weakened and investors grew increasingly worried about economic growth. The costly trade war between the U.S. and China escalated during the quarter and the U.S. threatened to expand trade disputes to Mexico. That rattled investors who were dealing with an already volatile market and hoped for some kind of resolution. (Jacob Ford/Odessa American via AP, File)

Oil prices rallied towards $65 per barrel on fears of a US military attack on Iran that would disrupt flows from the Middle East, which provides more than 20 per cent of the world's oil output.

"Crude prices are spiking on increased Middle East tensions after Iran shot down a US drone in what the US claims is international airspace," said Jason Gammel from Jefferies, a New York-based financial services company.

Iran said it had shot the drone over its territorial waters.

Brent crude, a major trading classification of crude oil that serves as a benchmark price for purchases of oil globally, was up 0.66 per cent at $64.87 per barrel on Friday. The global benchmark jumped 4.3 per cent on Thursday and was up around 5 per cent for the week, in its first weekly gain in five weeks.

Iranian officials said on Friday that Tehran had received a message from American President Donald Trump through Oman overnight warning that a US attack on Iran was imminent.

The officials said they had responded by saying that any attack would have regional and international consequences.


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Tensions have been on the rise because US sanctions on Iran have severely reduced oil exports from Opec's third largest producer and Washington has blamed Tehran, which denies any role, for a series of attacks on oil tankers in the Gulf.

"There is no doubt that a severe disruption to the transit of oil through this vulnerable route would be extremely serious," said consultancy FGE Energy in a note.

Meanwhile, world stocks also fell on Friday because of the threatened US military strike against Iran.

MSCI world equity index, which tracks shares in 47 countries, fell from a seven-week high - driven mostly by weakness in Asian stocks.

Another macroeconomic factor supporting global oil prices is the plan by Beijing and Washington to resume talks to resolve a trade tariff war that has hit economic growth prospects.

"Trade anxiety has died down, pushing energy prices higher as global growth will not be pressured by a prolonged tariff war," said Alfonso Esparza, senior market analyst at US-based OANDA, which provides currency solutions to corporate clients.