Oil surged as much as 3% before paring gains on Friday on reports that Israel is preparing for an imminent attack on government targets from Iran as soon as Saturday.
West Texas Intermediate (CL=F) futures rose to October highs before settling at $85.66 per barrel, while Brent (BZ=F), the international benchmark price, settled just above $90.45 per barrel.
"The escalation of tensions between Israel and Iran is also indicating to traders it may worsen before it gets better and there seems to be a lot of option call buying as we go into the weekend which is keeping an upward pressure on futures prices," Dennis Kissler, senior vice president at BOK Financial, said in a note to clients on Friday.
Iran’s production is estimated at 3 million barrels per day.
"If a large percentage of that [production] were to move away or be delayed to the world market the supply/demand picture could tighten further very quickly," said Kissler.
Crude prices have been on an upward trend amid continued output cuts by oil alliance OPEC+ and tensions stemming from the Israel-Hamas war. Ukrainian drone attacks against Russian refineries have also impacted futures to the upside.
While analysts have outlined a possible path toward $100 Brent, they also predict OPEC members will step in with spare capacity to keep prices from getting too high.
"We think oil into the summer months will kind of top out at around $95+ a barrel," Bank of America head of global commodities Francisco Blanch told Yahoo Finance earlier this week.
WTI is up more than 21% year to date while Brent has gained roughly 20% during the same period.
Higher energy costs have contributed to the last two months' inflation prints in the US as gasoline prices have inched higher.
On Wednesday, the national average for gasoline stood at $3.63 per gallon, up $0.23 from one month ago, according to AAA data.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.