Oil prices advanced during Friday's Asian deals, trading just below fresh seven-month highs as geopolitical tensions intensified after United States President Donald Trump imposed a deadline on Iran to reach an agreement over its nuclear programme.
By 2:45 pm AEDT (3:45 am GMT), Brent crude futures were up 14 cents, or 0.2%, at $71.80 a barrel, while U.S. West Texas Intermediate crude gained 35 cents, or 0.5%, to $66.78.
Prices had settled at six-month highs in the previous session after Trump warned that “really bad things” would happen if Tehran failed to come to terms on a nuclear deal within 10 to 15 days.
Meanwhile, Iran has reportedly planned joint naval exercises with Russia, days after temporarily closing the Strait of Hormuz for military drills.
The waterway, which separates Iran from the oil-rich Arabian Peninsula, carries roughly 20% of global oil supply. As such, any escalation in the area could constrain flows to international markets and drive prices higher.
ANZ analysts said in a note to clients: "Axios reported that a major U.S. military operation in the Middle East would begin soon and Israel is targeting regime change in Iran.
"The array of U.S. forces stationed there is unlike anything it has done since 2003 when it amassed forces ahead of the invasion of Iraq. President Trump suggested a 10-day time frame to make a nuclear deal with Iran.
"Talks between the two sides have so far been inconclusive. In the meantime, the U.S. has been ratcheting up pressure on Iran through increased adherence to current sanctions.
"Any outbreak of fighting would jeopardise flows from a region that pumps about a third of the world’s supplies. This has seen the market build-in a relatively large geopolitical risk premium in current oil prices."
Supporting prices further, U.S. crude inventories fell by 9 million barrels last week, according to data from the Energy Information Administration (EIA). Markets were expecting a build of 2.1 million barrels.
