Oil prices are further up by over 3% this week following good news on the economy and hopes of a cut in interest rates due to the tension in the Middle East, which is likely to affect oil supplies.

Oil is headed higher heading in the weekend and expected to stay with the gain all the way into next week with gains of over 3% expected in the first week of this year. Prices have been reportedly driven by good news on the economy and optimism that interest rates will be cut, but the situation in the Middle East has also brought concerns for oil supplies.

Brent crude, the world benchmark, rose to $79.53 a barrel on Friday. The price is 37 cents higher, reflecting a gain of around 0.5% from the previous trading day. Similarly, U.S. West Texas Intermediate (WTI) crude oil was priced at $76.65 per barrel, up by 46 cents, or about 0.6%.

Brent crude is set to record a weekly gain of more than 3.5%, while WTI crude is set for a gain of more than 4%. Besides the coronavirus spread, this has, in part, driven the oil price higher in the past week: hopes for positive economic data prints and the expectations that the Reserve might lower its interest, with lower interest tending to make it cheaper to borrow money—helps boost the economy by boosting demand for oil.

Dennis Kissler is senior vice president at BOK Financial; he explains oil prices have been on the way to recovery over the last few days. He pointed out that some geopolitical tension is also fueling oil prices. At the same time, fears of going into a possible recession are a bit eased, which helps a bit in oil prices.

Recent comments by Federal Reserve officials suggested they might soon lower interest rates, which would mark a second jolt of stimulus from the central bank and support oil demand from investors with the belief that the economy would continue to expand. Further, reinforced oil prices were news from the government report on unemployment, indicating that the number of Americans who were considered unemployed and who had recently filed for benefits was below projections. That suggests the labor market is far stronger than feared and has been helping underpin oil prices.

The other factor that kept a bid under oil prices was the improvement in China’s consumer price index. This is a measure of inflation, or change in price of goods and services. The CPI increased last month more than expected, showing signs of resilience in the Chinese economy. Since China is the largest buyer of oil, there can be some support to prices stemming from good economic statements out of China.

On a call with globalists as well as other diversified expertise in finance and research, George Khoury noted that withthe rise of Chinese inflation data, this should help boost further confidence in oil prices. This comes despite the ongoing geopolitical tensions that are helping to keep prices at these high levels. For example, recent escalations have been seen in the Middle East as Israeli forces resume heavy airstrikes in Gaza, killings many. This raised many concerns on probable retaliation actions by Iran and other militant groups, further disrupting oil supplies from the Middle East.

Meanwhile, Iranian-backed Houthi militants have engaged in continued attacks against international shipping in waters near Yemen, adding to insecurity over oil supplies in the region. In the meantime, leaders from the US, Egypt, and Qatar have called for negotiations between Israel and Hamas to reach a final ceasefire and also work on a hostage deal, the details of which would be fine-tuned from discussions that are scheduled to happen on August 15.

In addition to the Middle East conflict, oil prices are also affected by the ongoing conflict between Russia and Ukraine. Russia is reportedly still sending additional military equipment to its southern regions in its continued battle with the Ukrainian forces. The continuation of this conflict only adds to the uncertainty within the global oil market.

Another headline supporting higher oil prices was out of Libya. Now, Libya’s National Oil Corp has declared force majeure at its Sharara oilfield, meaning it is unable to meet oil supply commitments because of protests. That event caused a reduction in the output of the field and further contributed to concerns on global oil supplies.

Summarily, there are rising oil prices based on good economic news, hope for lower US interest rates, and ongoing geopolitical tensions. Conflicts in the Middle East and the disruption of oil production in Libya add further uncertainty to the oil market, causing a rally in prices as the United States economy shows signs of strength, and inflation data in China supports oil demand. As these factors develop, they are likely to continue influencing oil prices in the coming days.