After reaching a two-week low, oil prices bounced back on Friday as a result of U.S. warplanes bombing targets in eastern Syria that were connected to Iran. This action further escalated tensions in an already volatile Middle East.
- West Texas Intermediate crude oil for December (CL00, +2.38% CL.1, +2.38%) surged by $1.87, or 2.2%, to reach $85.05 per barrel. The previous day, the contract had experienced a drop of nearly 2.6% before settling at $83.21.
- December Brent crude (BRN00, +2.22%), the global benchmark, saw an increase of $1.76, or 1.7%, reaching $88.78 per barrel. Both Brent and WTI crude settled at their lowest levels since October 12, as reported by Dow Jones Market Data.
- November gasoline (RBX23, +2.16%) rose by 2.1% to reach $2.30 per gallon, while November heating oil (HOX23, +1.23%) experienced a 1% increase, reaching $3.07 per gallon.
- November natural gas (NGX23, +3.24%) climbed by 3.4% to reach $3.324 per million British thermal units.
In response to a series of attacks on U.S. air bases in the region that began last week, U.S. warplanes targeted two locations in eastern Syria that the Pentagon claims to be associated with Iran's Revolutionary Guard Corps.
According to the Pentagon, there have been a total of 19 attacks on U.S. bases and personnel in Iraq and Syria since October 17, including three recent attacks on Thursday.
Oil Prices React to Israel-Gaza Conflict
Oil prices experienced a rise, although not as significant as the gains seen in Asia overnight. The ongoing Israel-Gaza war has instilled caution among oil traders, who fear that the conflict may expand and involve Iran, a major crude oil producer.
Iran's Impact on Oil Production
According to the International Energy Agency (IEA), Iran has increased its daily oil production by approximately 500,000 barrels during the first half of this year. This surge in production means that Iran is expected to contribute significantly to the growth in global oil supply. In fact, Iran currently accounts for around 10% of OPEC's output, as confirmed by Barbara Lambrecht, a commodity analyst at Commerzbank.
Escalation of Conflict
In anticipation of an upcoming ground invasion into the Hamas-controlled territory, Israeli troops carried out a second brief raid into northern Gaza on Friday.
Related: 4 reasons why oil prices have only seen a modest Middle East risk premium
Impact of US Economic Data
Oil prices experienced a decline on Thursday, partly due to strong gross domestic product data from the United States. This data raised concerns about the possibility of a Federal Reserve interest rate hike in December.
Focus on Inflation
The economic calendar for Friday includes the release of the Personal Consumption Expenditure (PCE) price index, which is the Federal Reserve's preferred measure of inflation. The core level of this index is expected to show a monthly increase of 0.3%. This data release is particularly relevant ahead of the Fed's upcoming meeting next week.