By:Zawya

Oil prices extended gains on Friday, climbing more than $1 a barrel to pare weekly losses, after reports Iran was preparing a retaliatory strike on Israel from Iraq in the coming days.

Brent crude futures were up $1.39, or 1.9%, at $74.20 a barrel by 0736 GMT. U.S. West Texas Intermediate crude rose $1.44, or 2.1%, to $70.70.

Israeli intelligence suggested that Iran is preparing to attack Israel with a large number of drones and ballistic missiles from Iraqi territory in the coming days, possibly before the U.S. presidential election on Nov. 5, Axios reported on Thursday, citing two unidentified Israeli sources.

This heightens the likelihood of additional hostilities erupting before the U.S. election, SEB Research analyst Ole Hvalbye said in a note.

Oil prices were also supported by expectations that OPEC+ could delay December's planned increase to oil production by a month or more, four sources close to the matter told Reuters on Wednesday, citing concern about soft oil demand and rising supply. A However, prices are on track for a weekly decline of more than 1%, struggling to recover from a 6% loss on Monday after Israel's strike against Iran's military on Oct. 26 bypassed oil and nuclear facilities and did not disrupt energy supplies.

Hvalbye said that, though the situation in the Middle East could escalate sooner than expected, both Israel and Iran seem reluctant to ignite a full-scale regional war.decision could be made as early as next week, two of them said.

"Any additional responses from Iran might remain restrained, similar to Israel’s limited strike last weekend, hence primarily intended as a demonstration of strength rather than an invitation to open warfare," he said.

IG analyst Tony Sycamore said that all bets are off next week ahead of the U.S. election and China's NPC standing committee meeting.

"I think it will depend on who wins the U.S. election and what fiscal stimulus details, if any, come from the NPC standing committee meeting," he added.