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US Oil Update: Futures Gain as US-Iran Attacks Widen, Red Sea Risks Fuel Supply Fears

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Crude oil futures climbed over 4% in midday trading on Friday as a deepening military confrontation between the US and Iran stoked supply shock fears, with markets weighing the potential closure of the Bab-el-Mandeb Strait on the Red Sea.

Front-month West Texas Intermediate crude futures jumped 4.4% to $82.44 per barrel, while Brent futures advanced 4.5% to $880/bbl.

Gelber & Associates strategists said that WTI is now on track for a weekly gain of about 14%, with near-term price direction likely to remain highly sensitive to shipping flows and any signs of escalation or de-escalation.

The US and Iran have stepped up tit-for-tat attacks beyond military infrastructure during a sixth straight day of hostilities, stoking fears of a return to full conflict with no agreement reached over the Strait of Hormuz.

US Central Command attacked southern Iran overnight, striking six road bridges and dozens of military targets such as military logistics infrastructure and maritime capabilities.

The US military also said that it destroyed a surveillance tower yesterday belonging to Iran's Islamic Revolutionary Guard Corps on the country's southeastern coast.

The destruction of the Chah Bahar Shahid Kalantari Port surveillance tower in the port city of Chabahar will degrade the IRGC's "ability to track and target commercial shipping in the Strait of Hormuz," and to attack civilian crews, Centcom said.

Iran, in response, hit US military infrastructure in Bahrain, Jordan, Kuwait, Oman, Qatar and Syria as Tehran steps up its counterstrikes since fighting picked up early last week.

Kuwait reported strikes on a water desalination and electricity plant, with many power-generation units sustaining damage.

Tehran also fired at Syria, apparently for the first time since the outbreak of the conflict, targeting what it described as a US special forces base in Tanf, an operation that was refuted by Centcom.

Soojin Kim, research analyst at MUFG, said that fresh US strikes on Iranian military targets, alongside attacks on vessels near Iran's main export terminal and missile threats extending to Qatar and the Bab el-Mandeb shipping route, heightened fears of broader regional disruption.

US oil and gas stocks climbed this week, buoyed by a jump in crude prices as escalating tensions in the Middle East prompted traders to recalibrate risk in the energy sector ahead of Q2 earnings season, RBC Capital Markets strategists said in a Friday note.

The analysts said the commodity price spike helped lift the XOP energy sector index by 4%, decoupling from natural gas, which saw Henry Hub prices slide 4%.

Meanwhile, RBC said that Canadian crude exports from the Westridge Marine Terminal held steady in June, with robust demand from Asia driving the Trans Mountain pipeline to operate at or near its full contracted capacity.

The terminal in British Columbia saw 26 oil tankers depart in June, matching the previous month's volume, the research firm said.

The steady pace of shipments signals that the expanded Trans Mountain Pipeline continues to perform at its contracted capacity of 712,000 barrels per day.

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