Oil prices increase due to renewed tensions between the US and Iran, along with the risk of closing the Red Sea.

Oil prices increased by over 2% on Friday as tensions escalated between the U.S. and Iran in the Gulf, exacerbating shipping threats due to a potential closure of the Red Sea alongside restricted traffic through the Strait of Hormuz.

Brent crude futures climbed by $1.77, or 2.1%, reaching $86 a barrel by 1158 GMT, while U.S. West Texas Intermediate futures rose by $1.91, or 2.4%, to $80.86.

Both benchmarks have seen approximately 13% growth this week, with Brent poised for a third consecutive weekly gain and WTI on track for its second. Diesel refining margins reached record highs on Friday, with low-sulphur gasoil futures hitting $66.25 over Brent crude. The Middle East, a significant diesel exporter, faces tightened fuel markets and increased prices globally due to the Hormuz closure and attacks on oil refineries.

The breakdown of the truce between the U.S. and Iran has led to a decline in oil flows from the strait. Iran has also urged the Houthi movement to block the Red Sea route in retaliation for any U.S. strikes against its power infrastructure. Transit through the Red Sea has surged since the onset of the Iran war as Saudi oil exports have been redirected away from Hormuz, according to Commerzbank analysts.

They noted, "If a blockade of the Strait of Bab al-Mandab happens due to further escalation, oil prices are expected to rise even more." Iran reported carrying out new attacks on U.S. facilities in the Middle East on Friday, including a direct strike in Syria, following a sixth consecutive night of U.S. strikes targeting Iranian military assets.

U.S. Central Command announced on Thursday the initiation of a new series of strikes against Iran to further weaken its military capabilities. "Oil security remains a crucial concern," stated International Energy Agency Executive Director Fatih Birol during an event at the Council on Foreign Relations in Washington. "We should be alarmed, and I am concerned if the situation does not improve in the coming weeks."

Simultaneously, Qatar's defense ministry reported that its armed forces intercepted an Iranian missile attack early Friday, with the interior ministry confirming that a child was injured by shrapnel during the interception. Additionally, Kuwait's electricity ministry stated that one of its power generation and water desalination facilities was struck by an Iranian attack on Friday.