Live updates: Follow the latest news on US-Iran war
Oil prices remained elevated on Friday despite a US extension of its strike pause against Iranian energy facilities, with analysts warning crude could hit $200 a barrel if the conflict drags on.
US President Donald Trump said on Thursday he was pausing attacks on Iran's energy plants for 10 days, at Tehran's request, and said talks were progressing.
Meanwhile, Macquarie Group warned that oil prices could hit $200 per barrel if the war drags on until June – a scenario Citi analysts also posited earlier this week.
“If the strait [of Hormuz] were to stay closed for an extended period, prices would need to move high enough to destroy an historically large amount of global oil demand,” analysts at the Sydney-based firm wrote in a note.
“The timing of the reopening of the straits, and physical damage to energy infrastructure, is the main determinant of the longer-term impact on commodities.”
That comes after Bloomberg, citing sources, reported that Washington is already studying how oil at $200 will affect the economy and contingency measures are being drawn up.
“Mr Trump and the White House have been tweeting a storm, including cryptic images and videos. But whether to intimidate or distract, it seems to be doing neither,” said Michael Feller, co-founder and chief strategist at Sydney-based advisory Geopolitical Dispatch.
“Iran continues to hit US and allied targets. Most regional bases have been made uninhabitable. The Strait of Hormuz remains closed. Markets are choppy.”
Brent, the benchmark for two-thirds of the world's oil, was up 1.88 per cent at $110 a barrel at 1.32pm UAE time on Friday. West Texas Intermediate, the gauge that tracks US crude, climbed 1.8 per cent to $96.18 per barrel.
From last Friday's close, Brent is on pace to gain nearly 3 per cent, while WTI would decline by about 2.3 per cent.
Since the war between US-Israeli forces and Iran broke out on February 28, Brent has surged by more than 50 per cent and nearly hit $120, while WTI has leapt around 43 per cent. Year-to-date, Brent and WTI have spiked by about 80 per cent and 67 per cent, respectively.
Oil's price surge may prove temporary, according to Steve Wyett, chief investment strategist at BOK Financial, who pointed to the gap between near-term contracts, which have surged and longer-dated futures, which have risen far less, as a sign that traders expect the situation to ultimately resolve.
The duration of elevated prices may also matter more to consumers and inflation than the peak level.
"How long oil prices stay elevated could have more of an impact on consumers and inflation than how high energy prices rise," he said.
Energy infrastructure has been hit, and the Strait of Hormuz, through which a fifth of the world's crude shipments pass, has been effectively shut.
The energy crunch is being felt worldwide, especially in Asian countries that are heavily dependent on imported crude. The Philippines has already become the first country to declare a state of emergency over the crisis.
