(Bloomberg) -- Oil was set for a second weekly loss as the Israel-Hamas war remained contained and clouds appeared on the demand horizon.

Most Read from Bloomberg

Intuit Is Closing Personal-Finance App Mint, Shifts Users to Credit Karma S&P 500 Rises Almost 2%; Apple Down in Late Hours: Markets Wrap Immigrants Are Leaving Canada at Faster Pace, Study Shows Harvard, Yale Warned by Top Law Firms About Antisemitism Bankman-Fried Found Guilty of Fraud at FTX Criminal Trial

Global benchmark Brent held near $87 a barrel, after jumping 2.6% on Thursday amid dollar weakness and hints the Federal Reserve is done with tightening. West Texas Intermediate traded above $82. Israel said its troops encircled Gaza City and that a cease-fire wasn’t on the table, even as US President Joe Biden called for a pause to allow time to free more hostages.

There are still risks the conflict could spread and affect oil markets, however. Iran-backed Houthi rebels in Yemen have launched rockets and drones at Israel, while Saudi Arabia’s military is also clashing with the militant group.

“The possibility of Iran‑backed Hezbollah opening up a new front to the Israel‑Hamas war remains the key pathway for the Israel‑Hamas war to escalate,” Vivek Dhar, an analyst at Commonwealth Bank of Australia, said in a note. “We think any direct involvement of Iran in the Israel‑Hamas war will initially take Brent oil futures to $100 a barrel.”

Crude has mostly given up its war premium as the conflict has so far not endangered supplies from the region, the source of about a third of the world’s oil. That’s brought demand concerns back to the fore. Factory activity in China, the biggest importer, moved back into contraction last month, according to data released this week, while US fuel demand remains low and crude stockpiles are rising.

There are also signs of weakening diesel demand in some European countries, with sales slumping in Spain, the UK, Italy and France in September.



Elsewhere, the US stepped up pressure on the United Arab Emirates, a key OPEC producer, in the latest round of Russia-related sanctions. The measures are aimed at entities which trade goods that can be used as dual-use items for President Vladimir Putin’s war in Ukraine and financial services firms.

Terminal users can click here for more on the Israel-Hamas War.

Most Read from Bloomberg Businessweek

The US Housing Market Has Become an Impossible Mess World’s Safest Market Becomes a Magnet for Big Investors These Five Countries Are Key Economic ‘Connectors’ in a Fragmenting World Shipping Startup Flexport Is in Crisis Mode Heading Into the Holiday Season Foxconn Makes Your iPhone. Now It Wants to Make Your Electric Car

©2023 Bloomberg L.P.