Investing.com -- Oil prices surged on Friday, with significant weekly gains amidst concerns over potential disruptions in crude flows from the Middle East due to the ongoing conflict in the region.
By 09:20 ET (13.20 GMT), the WTI futures were up 0.8% at $78.24 a barrel, while the Brent contract climbed 0.8% to $74.35 a barrel.
The WTI futures were on track to gain around 8% for the week, marking its steepest increase since February 2023. Similarly, U.S. crude futures were set for a 7.5% weekly rise, the largest since March last year.
Crude Gains on Middle East Risk Premium
A risk premium has been factored into the crude market as traders await Israel’s response to Iran's recent missile attacks. There is speculation that any retaliatory strikes by Israel on Iranian oil facilities could disrupt the oil supply from the region.
President Joe Biden mentioned that the U.S. is considering supporting Israel's strikes on Iran's oil facilities in response to the missile attacks. Goldman Sachs has forecasted that oil prices could spike by $20 per barrel if Iranian production is impacted.
Goldman Sachs’ co-head of global commodities research stated that a sustained 1 million barrels per day drop in Iranian production could lead to a $20 per barrel increase in oil prices next year.
While OPEC has spare capacity to compensate for the loss of Iranian supplies, much of that capacity is located in the Middle East Gulf region and could be at risk if the conflict escalates further, according to an analyst at UBS.
Nonfarm Payrolls Impress
The crude market also received a boost from positive U.S. employment data, showing stronger-than-expected job growth in September. Nonfarm payrolls increased by 254,000 jobs last month, surpassing forecasts and the previous month's figure.
Additionally, the unemployment rate decreased to 4.1%, indicating a healthy labor market. This could suggest a steady demand for energy as the economy continues to show strength.
Analysis
The surge in oil prices due to the Middle East conflict and the positive U.S. employment data have significant implications for investors and consumers. The potential disruption in crude supply from the region could lead to higher oil prices, impacting energy costs and inflation globally.
Investors should monitor the situation in the Middle East closely and consider the impact on their portfolios. Consumers may see an increase in gasoline prices as oil prices rise, affecting their budgets and spending habits.
Overall, the developments in the oil market and the labor market indicate potential volatility and opportunities for investors to adjust their strategies accordingly.