By Katya Golubkova
TOKYO (Reuters) – Oil prices rose in early trade on Friday on heightened tensions in the Middle East, where Iran has promised to retaliate for a suspected Israeli air strike on its embassy in Syria, which could risk disruptions to supply from the oil producing region.
futures climbed 34 cents, or 0.38%, to $90.08 a barrel, while U.S. West Texas Intermediate crude futures rose 44 cents, or 0.51%, to $85.45, at 0033 GMT.
The gains erased some losses from the previous session, which was dominated by worries about stubborn U.S. inflation that dampened hopes for an interest rate cut as early as June.
Suspected Israeli warplanes bombed Iran’s embassy in Damascus in an April 1 strike 1 for which Iran has vowed revenge, ratcheting up tension in a region already strained by the Gaza war.
Israel has not said it was responsible but Iran’s supreme leader, Ayatollah Ali Khamenei, said on Wednesday Israel “must be punished and it shall be” for the attack.
The U.S. expects an attack by Iran against Israel but one that would not be big enough to draw Washington into war, according to a U.S. official. Iranian sources said that Tehran has signalled a response aimed at avoiding major escalation.
Israel is keeping up its war in Gaza but is also preparing for scenarios in other areas, Prime Minister Benjamin Netanyahu said on Thursday.
“The geopolitical risks remain elevated,” ANZ Research said in a note, adding that oil prices have jumped almost 19% also supported by improving economic conditions and supply cuts by the Organization of the Petroleum Exporting Countries and allies, together called OPEC+.
In Europe, where the labor market has begun to soften and growth is stagnating, central bankers left the policy rate unchanged on Thursday but signalled they remain on track to cut rates as soon as June.
“The European Central Bank’s decision to leave policy rates unchanged … was expected, but accompanying statements open the door for near-term monetary easing,” S&P Global Market Intelligence said in a note.
However in the U.S., Federal Reserve officials signalled on Thursday no rush to cut interest rates, as sticky U.S. inflation remains a concern.
