Oil recorded its highest increase in a month after Iran said that opening a new front in the conflict between Israel and Hamas is possible. Investors also covered bearish bets in anticipation of an expected invasion of the Gaza Strip.
West Texas Intermediate (WTI) jumped above $87 a barrel, confirming a $5 rise over the week after the outbreak of war. On Monday, prices rose after news of Hamas' surprise attack on Israel, but futures lost some of their gains in the next few sessions after investors ruled out any immediate risks to oil supplies from the Middle East.
Then prices rose again on Friday after Iran's foreign minister warned that Tehran-backed militants could open a new front in the Israeli war if the blockade of Gaza continues. The Israeli army is expected to launch a ground attack shortly after urging the evacuation of the northern part of Gaza.
Options markets, which witnessed huge volatility over the past week, saw another move in favor of buying a bullish bet, an unusual shift that shows that investors are hedging against the risk of further price rises.
Investors are trying to take into account the possibility of Iran, which provides weapons and money to Hamas, joining the war, and any risk of disruption to flows on a broader scale. While supply has not been significantly affected so far, traders said Friday's rise suggests investors are abandoning bearish bets ahead of the weekend.
On Thursday, the United States took its first steps in implementing sanctions it imposed on Russian oil flows. Sanctions were imposed on two ships for violating the price ceiling for Russian crude, a move that spooked tanker markets.
West Texas Intermediate crude futures for November delivery rose $4.78, settling at $87.69 a barrel in New York.
December settlement Brent crude futures jumped $4.89, settling at $90.89 a barrel.
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