Middle East Escalation Drives Oil Prices Higher Despite Friday's Decline

Oil prices retreated from their highest levels in months on Friday, but are still poised for significant weekly gains due to escalating tensions in the Middle East. Brent futures fell nearly $4, or 3.96%, to $96.70 a barrel at 0946 GMT after settling above $100 the previous session for the first time since May.

The decline comes as the US vows to punish Iran following Houthi attacks on two Saudi oil tankers in the Red Sea. The contract remains on track for a 9.7% advance this week, while West Texas Intermediate (WTI) futures dropped $3.15 or 3.42% at $89.04 a barrel, on course for an almost 8% weekly rise.

According to PVM Oil Associates analyst John Evans, 'Major hubs of oil production or supply routes are surrounded by war... The short-term outlook is bullish.' Meanwhile, JPMorgan analysts estimate that each additional month of disruption to oil supply would add around $7 to $8 a barrel to Brent, potentially lifting monthly average prices to around $114 a barrel if disruptions extend to three months.