Oil prices rose sharply in Asian trade on Friday as tensions in the Middle East came back into focus after Iranian news agencies reported several explosions across the country, indicating potential strikes by Israel.
Iran’s Fars News Agency said on Friday that explosions were heard in Isfahan in central Iran, in parts of southern Syria and in parts of Iraq. ABC news reported that U.S. officials said Israel had retaliated against Iran.
Brent oil futures expiring in June surged nearly 3% to $89.74 a barrel, while West Texas Intermediate crude futures expiring in May jumped 3% to $85.16 a barrel by 21:54 ET (01:54 GMT).
Both contracts reversed a bulk of their losses for the week, but were still set to end the week mildly negative.
Israel’s potential retaliation marks an escalation in the Middle East conflict, and saw traders racing to reintroduce a risk premium back into oil prices.
The location of the explosions- particularly in Isfahan- indicated that Israel may have also targeted Iran’s nuclear facilities.
The strikes come just a day after Iranian officials warned Israel over any retaliatory strikes, particularly on Tehran’s nuclear facilities. Tehran said it could reconsider developing a nuclear weapon if Israel attacked the country’s nuclear sites, which have so far been used only for peaceful, power-generating purposes.
Any such moves by Iran could mark a severe escalation in the Middle Eastern conflict.
Potential Israeli strikes on Iran come nearly a week after Iran launched a missile and drone strike against Israel last week, which was in retaliation for an alleged Israeli strike on an embassy in Damascus.
UN reports recently showed Iran was enriching uranium up to 60%, which was more than levels required for commercial power generation. But it was also below the 90% enrichment level required for an atomic bomb.
But despite Friday’s gains, oil prices were still set to fall over the past seven days.
A major point of pressure on oil prices this week was a stronger dollar, following strong U.S. economic data and warnings from a slew of Fed officials that interest rates will remain higher for longer.
A stronger dollar pressures crude demand by adding a currency-related premium for international buyers.
The prospect of higher-for-longer rates factors into fears that global economic growth will be stymied by tight policy, which also bodes poorly for oil demand.
Traders were seen largely pricing out expectations for a June rate cut by the Fed.
Still, bigger losses in crude were limited by the U.S. resuming its oil sanctions against Venezuela, citing a lack of progress towards holding fair elections in the country.
The U.S. and its allies also introduced more sanctions on Iran’s oil industry this week.
