DTN Oil

WASHINGTON (DTN) -- Nearby-delivery oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Friday's session with gains between 4.5% and 5.5%, supercharged by a pledge from G7 nations to strengthen the sanction regime on Russian oil exports that kicked off with penalizing two foreign oil tankers, while the escalating war between Israel and Palestinian militant group Hamas risks metastasizing into a broader conflict in the Middle East.

Iran's foreign minister, Hossein Amir-Abdollahian, whose government explicitly supports Hamas, on Friday threatened to open the second front on Israel's northern border should violence in the Gaza Strip escalate any further. Although Tehran denied its direct involvement in the brutal attack on Israeli civilians, recent statements from Iranian officials sound increasingly aggressive toward Israel and a potential ground offensive in the Gaza Strip. Israel has given Palestinians residing in northern Gaza 24 hours to evacuate to the southern parts of the Strip, although not a single humanitarian corridor currently operates for the civilians to leave the besieged enclave. Talks with Egypt to open a humanitarian corridor through a pedestrian-only crossing in Rafah have so far failed, according to the most recent reports. The United Nations warned on Friday the relocation of 1.1 million people in such a short timespan would be impossible to implement, resulting in a "humanitarian disaster."

Explosive conflicts like these can take a sudden turn in any direction, according to analysts and traders, prompting disruption of oil supplies in the Middle East.

"A sharp escalation in geopolitical risk in the Middle East, a region accounting for more than one-third of the world's seaborne oil trade, has markets on edge. While there has been no direct impact on physical supply, markets will remain on tenterhooks as the crisis unfolds," said the International Energy Agency in its October Oil Market Report released Thursday.

Friday's move higher in the oil complex also follows renewed efforts by G7 nations to clamp down on sanctions evasion by international shipping companies carrying Russian oil above the established price cap of $60 per barrel (bbl). U.S. Treasury Department on Thursday slapped sanctions on two shipping companies based in Turkey and the United Arab Emirates for violating the sanctions' regime while using U.S. banking and insurance services.

"Taking the steps is sending a clear message to Russia that we will continue to be focused on forcing them into two costly options. And attempts to expand beyond them will face a decisive and unified response," read a U.S. Treasury Department statement.

The United States, European Union, Group of Seven countries and Australia, imposed a $60-per-bbl limit last year on what Russia could charge for its oil. The cap was designed to deprive the Kremlin of revenue to fund its war in Ukraine, forcing the Russian government either to sell its oil at a discount or divert money for a costly alternative shipping network.

At settlement, NYMEX West Texas Intermediate futures for November delivery jumped $4.78 to $87.69 per bbl, while ICE Brent spiked $4.89 to finish a volatile week of trading at $90.89 per bbl. NYMEX November ULSD futures climbed to $3.2117 per gallon, surging $0.1668 in afternoon trading, and front-month RBOB futures added $0.1003 to settle at $2.2653 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com