Oil prices dip despite 12% weekly surge amid Red Sea tensions

Oil futures declined on Friday, even as they remained on track for significant weekly gains, driven by fears of supply disruptions in the Red Sea and escalating tensions related to the Iran conflict.

As of 07:47 GMT, Brent crude futures dropped $1.82, or 1.81%, to $98.87 per barrel, after surpassing $100 on Thursday for the first time since May. Brent had risen 7% in the previous session following claims by Iran-aligned Houthi militants that they targeted two Saudi oil tankers in the Red Sea. Brent is set for a 12% weekly increase.

US West Texas Intermediate (WTI) crude futures also fell $1.60, or 1.74%, to $90.59 per barrel, but are still heading for a 9.7% weekly gain.

John Evans, analyst at PVM Oil Associates, noted that oil production centers and key supply routes are surrounded by conflict, predicting that prices are likely to remain elevated in the short term.

US President Donald Trump vowed "severe military punishment" against Iran and its Houthi allies following the Red Sea attacks. In response, Iran urged its allies in Yemen to close the Bab al-Mandab Strait if the US continues to strike Iran's electricity infrastructure. Bab al-Mandab is the world's second most important oil shipping chokepoint after the Strait of Hormuz.

On Monday, the Houthis announced a naval blockade on Saudi Arabia, which has rerouted its oil exports through a pipeline to avoid the Strait of Hormuz, which Iran is known to close as a threat.

Analysts at JP Morgan noted that each additional month of oil supply disruption could add $7 to $8 to Brent prices, potentially pushing the monthly average to around $114 if the disruption lasts three months.

Meanwhile, Russia announced on Friday that its forces targeted three Ukrainian ports overnight, damaging shipping and unloading facilities as well as fuel reserves supporting the Ukrainian military.

Separately, Kazakhstan's energy ministry said on Thursday that oil companies had temporarily reduced output after suspected Ukrainian attacks forced the closure of the country's main Black Sea export terminal.