West Texas Intermediate (WTI) – the benchmark US crude oil price – edges higher during the Asian session on Friday, though it remains confined within a multi-day-old range. The commodity currently trades around the $79.35 region, up 0.50% for the day and close to a one-month high set on Tuesday, and seems poised to register gains for the second straight week amid the risk of a further escalation of US-Iran tensions.
The US military carried out a sixth consecutive night of air strikes against Iran on Thursday and also struck an empty oil tanker headed for Kharg Island as part of its renewed naval blockade on Iranian ports. Meanwhile, Iran carried out attacks on US military facilities across the region, raising fears of a return to all-out war and keeping the geopolitical risk premium in play. This is seen as a key factor that continues to act as a tailwind for crude oil prices.
Meanwhile, officials in southern Iran’s Bandar Abbas reported that civilian infrastructure – including power facilities and a train station – has been hit. Iran's Islamic Revolutionary Guard Corps had threatened to expand the conflict by targeting additional regional energy supply routes. Furthermore, Reuters reported that Iran has asked Yemen’s Houthis to stand ready to close the Red Sea oil route, posing a potent new threat to global energy supplies.
This, along with a drop in shipping traffic through the Strait of Hormuz, lends additional support to crude oil prices and backs the case for further gains. However, it will still be prudent to wait for some follow-through buying and a sustained breakout through a multi-day-old range before placing fresh bullish bets on the commodity. Meanwhile, the fundamental backdrop suggests that any corrective pullback is more likely to be bought into and remain cushioned.
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