US-Iran Tensions Send Oil Prices Soaring Amid Strike Escalation

Oil prices dropped by around 3% on Friday morning but remained on track for a weekly gain of 10% amid escalating tensions between the US and Iran.

The US Central Command completed its 13th consecutive night of strikes on Iran, targeting military command centers, drone storage facilities, communication networks, coastal surveillance sites, and maritime capabilities.

US President Donald Trump told Axios that he was mulling a 'massive attack' on Iran, saying it would be 'bigger than ever before', but did not specify what this would entail or when it might happen.

Growing instability around key shipping routes has rebuilt a 'sizeable geopolitical risk premium' into oil markets, according to Daniela Hathorn, senior market analyst at capital.com. Investor sentiment has been dampened by continued disruption in the Red Sea and tensions around the Strait of Hormuz, which are keeping energy markets tight and inflation risks elevated.

Meanwhile, Giovanni Staunovo, a strategist at UBS Global Wealth Management, said that markets may be overestimating the oil market's recovery from the conflict. He expects the production recovery process in the Middle East to be slower than anticipated due to depressed inbound vessel flows.