Oil rose 2% on Friday and was set for a small weekly gain, as tension in the Middle East raised the risk of supply disruptions and offset the potentially bearish impact of reduced expectations for U.S. interest rate cuts this year. Brent crude futures were up $2.19, or 2.44%, at $91.93 a barrel by 1340 GMT, while U.S. West Texas Intermediate crude futures rose $2.42, or 2.85%, to $87.44. Taking into account Friday’s sharp rises, both contracts were heading for slight week-on-week gains, having closed last Friday’s session at $91.17 and $86.91 a barrel respectively. Concern that Iran might retaliate for an attack on Monday by suspected Israeli warplanes on Iran’s embassy in Damascus has supported oil near a six-month high this week, despite dampening factors such as rising U.S. inventories. “As we have seen on numerous occasions since December, the risk of a geopolitical event occurring during the weekend is once again lifting the risk premium ahead of the weekend only to drop again on Monday,” said Saxo Bank’s Ole Hansen. The U.S. expects an attack by Iran against Israel but one that would not be big enough to draw Washington into war, according to a U.S. official. Iranian sources said that Tehran has signalled a response aimed at avoiding major escalation. ING analysts said they expect oil’s rally to retreat unless there is a further escalation in the Middle East or supply disruptions. “We maintain our forecast for Brent to average $87 a barrel over the second quarter of this year,” the ING analysts added. Prices had briefly pared gains after the International Energy Agency cut its forecast for 2024 world oil demand growth to 1.2 million barrels per day, although OPEC’s view on Thursday that growth would be 1 million bpd higher than that lent support. “For now the market is mostly in the OPEC 2.2 million bpd demand growth camp as opposed to the IEA’s reduced 1.2 million bpd forecast,” Saxo Bank’s Hansen added. Friday’s gains also erased the losses from the previous session, which was dominated by stubborn U.S. inflation that dampened hopes for an interest rate cut as early as June. Higher interest rates increase the cost of buying goods and services, which can weaken economic growth and depress oil demand.