Investing.com -- Oil prices soared Friday following missile strikes by the United States and Britain on Houthi targets in Yemen, raising fears of an escalation of the conflict in the Middle East.
By 09:10 ET (14.10 GMT), the U.S. crude futures traded 2.5% higher at $73.85 a barrel and the Brent contract climbed 2.4% to $79.25 a barrel.
Both benchmarks were on course for a second straight weekly rise.
Crude soars after strikes against Houthi
The United States and Britain carried out the strikes in retaliation for attacks by the Iran-backed group on shipping in the Red Sea, with the move aimed at protecting the shipping routes through this key region.
This followed Iran seizing a tanker with Iraqi crude destined for Turkey on Thursday, which added to market concerns about the Israel-Hamas war widening into a broader conflict in the Middle East affecting oil supplies from the region, especially those moving through the critical Strait of Hormuz.
Several major shipping operators have decided to steer clear from the region, disrupting supplies on the key route between Europe and Asia.
“More than 20m b/d of oil moves through the Strait of Hormuz, which is equivalent to around 20% of global consumption. So clearly, more significant disruptions to oil flows in this region will be much more alarming for markets,” said analysts at ING, in a note.
U.S. producer prices fall
These gains were helped by the release of data showing U.S. producer prices unexpectedly fell 0.1% on the month in December, suggesting lower inflation in the months ahead.
This raised hopes that the Federal Reserve will start cutting interest rates in the first quarter of this year, adding to economic activity in the largest economy, and also the biggest energy consumer, in the world.
This contrasted with Thursday’s data showing U.S. consumer prices increased more than expected in December.
Data released earlier Friday showed that China's exports grew at a faster pace in December, up 2.3% from a year earlier, suggesting global trade is slowly turning a corner.
Citi cuts Brent price forecasts
However, despite the recent gains, worries about the overall health of the market still exist, especially after top exporter Saudi Arabia slashed the prices of oil sales to Asia and parts of Europe earlier in the week.
Citi Research on Friday cut its 2024 Brent price forecast by $1 to $74 per barrel and slashed 2025 forecast by $10 to $60 per barrel, citing oversupply concerns.
The bank added that recent activity in the Red Sea causing further tension in the Middle East could see near-term upside to the risk premium.
(Ambar Warrick contributed to this article.)