Oil prices surge nearly 6% as Middle East tensions rise with Israel ordering mass evacuations in Gaza

Price action

• West Texas Intermediate crude for November delivery
  CL00,
  +0.03%

  CL.1,
  +0.03%

  CLX23,
  +0.03%
  climbed $4.78, or 5.8%, to settle at $87.69 a barrel on the New York Mercantile Exchange. Prices for the front-month contract ended 5.9% higher for the week, according to Dow Jones Market Data.

• December Brent crude
  BRN00,
  -0.10%,
  the global benchmark, rose $4.89, or 5.7%, to settle at $90.89 a barrel on ICE Futures Europe, for a weekly rise of 7.5%.

• November gasoline
  RBX23,
  +0.06%
  added 4.6% to $2.27 a gallon, posting a weekly rise of 3.3%, while November heating oil
  HOX23,
  +0.00%
  rose 5.5% to $3.21 a gallon, ending 10.7% higher on the week.

• Natural gas for November delivery 
  NGX23,
  -0.87%
   fell 3.2% to $3.24 per million British thermal units, contributing to a 3.1% weekly decline.

Market drivers

Oil prices rallied Friday “thanks to mounting geopolitical risks,” Lukman Otunuga, manager, market analysis at FXTM, told MarketWatch.

“Escalating tensions in the Middle East, home to almost a third of global oil supply kept prices buoyed while the U.S. tightening its sanctions against Russian crude exports complemented upside gains,” he said.

Read: Israel-Gaza war scenarios: Here’s what might lift oil prices to $95, $100 and $115 a barrel

U.S. benchmark oil prices settled higher for the first time in four sessions, as investors watched headlines from the Middle East. The Israeli military ordered around 1 million people in northern Gaza on Friday to evacuate to the south.

That represents nearly half the population of the territory, and such an evacuation would be not only impossible, but disastrous, said the U.N., whose people on the ground were also warned to leave the area. The fresh escalation has raised fears that Israel is about to embark on a ground invasion.

Also see: Why uranium prices have climbed to their highest in over a decade

“Supply concerns remain rife with growing concerns over the conflict between Israel and Hamas spreading through the region, resulting in major disruptions in an already tight market,” said Otunuga. “While oil is likely to remain supported by supply-side factors, the demand side of the equation may create headwinds down the road — especially when factoring global recession fears.”

Also see: Investors flock to safe-haven gold, sharply lifting prices for the metal to their highest in nearly 3 weeks

Iran’s Foreign Minister Hossein Amirabdollahian indicated that Iran-backed Hezbollah militants in the area could open up another front if the continuing siege of Gaza and attacks by Israel continue, Bloomberg reported on Friday.

“Of course in the case of the continuation of war crimes and the humanitarian blockade of Gaza and Palestine every possibility and decision by the other currents of the resistance is possible,” Amirabdollahian told reporters in Beirut.

Read: Iran’s $6 billion reportedly won’t be released under U.S.-Qatar deal

The evacuations were ordered nearly one week after Hamas launched an attack on Israel, killing more than 1,200 people. To date, the conflict has left more 2,800 people dead on both sides.

U.S. oil prices had posted a decline on Thursday after a U.S. government report showed a more than 10 million-barrel weekly rise in domestic crude inventories, and an increase in U.S. oil production to its highest on record.

Also see: Baker Hughes data show a climb in the weekly active U.S. oil-drilling rig count

Looking at the technical picture for oil, Otunuga said WTI bulls have a “steep hill to climb before heading anywhere near $100, but a move back above $87.50 could be the first signs of bulls reclaiming lost territory.”