Middle East tensions push oil prices higher

LONDON - Oil prices are headed for their largest weekly rise in over a year on Friday, spurred by escalating Middle East tensions that have cast a pall over global markets ahead of the weekend.

Most equity indexes and stock futures were in the black, but gains were capped as investors speculated that Israel could imminently carry out retaliatory strikes on Iran.

Brent crude futures were set to gain around 8% for the week - its steepest since February 2023, while US crude futures' 8.2% weekly rise would be the largest since March last year.

Markets may have found some solace from US President Joe Biden saying he did not believe there is going to be an "all-out war" in the Middle East. However, he did previously indicate that the US was discussing strikes on Iran's oil facilities as a response to Tehran's missile attack on Israel.

Notwithstanding oil's recovery from a low base and prices reverting to levels seen only a month ago, world stocks and investors' risk appetite are beginning to feel the pressure.

Should geopolitical tensions persist and oil prices continue to rise, investors may need to reassess their inflation forecasts.

The risk of a widening conflict in the Middle East is likely also keeping Federal Reserve Chair Jerome Powell on his toes, and perhaps had some part to play when he said the US central bank would likely stick with quarter-percentage-point interest rate cuts moving forward.