West Texas Intermediate (WTI) crude oil climbed to its highest level since February, trading around $72.05 during Asian trading hours on Friday. The sharp rise follows Israeli airstrikes on Iranian targets, igniting fears of a broader conflict in the Middle East — a region responsible for roughly one-third of global oil production.
Late Thursday, Israeli Defense Minister Israel Katz confirmed a “preemptive strike against Iran,” while declaring a state of emergency in anticipation of retaliation. Prime Minister Benjamin Netanyahu later stated that the operation targeted Iran’s core nuclear enrichment and weaponization programs, including the main facility in Natanz. He vowed to continue operations “for as many days as it takes.”
The market reacted swiftly to the escalating conflict, with oil prices factoring in a heightened geopolitical risk premium. “We are back in an environment of heightened geopolitical uncertainty, leaving the oil market on tenterhooks and requiring it to start pricing in a larger risk premium for any potential supply disruptions,” noted Warren Patterson, head of commodities strategy at ING Groep NV.
Trade Policy Concerns Loom Over Bullish Momentum
However, rising tensions aren’t the only factor influencing crude prices. Market sentiment remains cautious amid renewed trade policy threats from former U.S. President Donald Trump. Although Trump claimed that a new trade agreement with China is “done,” there was no official confirmation from Beijing. He also signaled plans to notify dozens of U.S. trade partners of potential unilateral tariffs ahead of the July 9 deadline following a 90-day pause.
These developments inject additional uncertainty into the market. A deterioration in U.S.-China trade relations could weigh on global economic growth and, by extension, energy demand — potentially offsetting some of the upward momentum in oil prices.
Key Data Ahead
Traders are now closely watching for further developments in both the geopolitical and trade spheres. Additionally, attention will turn to Friday’s release of the preliminary U.S. Michigan Consumer Sentiment Index, which could offer further clues on domestic economic health and influence near-term oil demand expectations.
