Oil and the dollar rose as tensions in the Middle East unnerved investors ahead of US jobs data due later Friday that will help identify the path ahead for interest rates.

West Texas Intermediate crude extended gains early Friday after rising more than 5% Thursday to a one-month high, along with global benchmark Brent. The rise accelerated after puzzling comments from President Joe Biden, who told reporters the US was discussing whether to support potential Israeli strikes against Iranian oil facilities.

Investors are concerned that should Israel strike critical Iranian assets, the Islamic Republic will lash out and escalate the conflict, dragging in more countries and potentially disrupting global energy shipments. Israel said it bombed more than a dozen Hezbollah targets in Beirut on Thursday.

An index of dollar strength climbed for a fourth session, tracking a rise in treasury yields. The 10-year yield rose six basis points to 3.85%, its highest level since early September. The pound fell sharply against the dollar on signs the Bank of England may cut rates more aggressively.

Equity futures for Japan were little changed while those for Australia and Hong Kong fell. Mainland China markets are shut for a holiday. The S&P 500 and Nasdaq 100 edged lower Thursday, with the energy sector outperforming in both benchmarks as oil rallied. US equity contracts showed slight losses early Friday.

Amid all the geopolitical uncertainty, investors are looking for further signals on the health of the US economy, with the monthly payrolls report due on Friday. The unemployment rate is forecast to hold steady at 4.2% in September while payrolls are expected to rise by 150,000. 

“If the unemployment rate ticks up, I wouldn’t be surprised that markets would shift back toward expecting 50 basis points and then it is a question of how the Fed may react,” Kallum Pickering, chief economist at Peel Hunt, said on Bloomberg Television.

Other economic signs showed robustness in the US economy. The Institute for Supply Management’s index of services posted its best reading since February 2023, ahead of Wall Street estimates. Applications for US unemployment benefits rose slightly last week to a level that is consistent with a limited number of layoffs. Continuing claims, a proxy for the number of people receiving benefits, were little changed from the previous week.

The readouts “were both solid in September,” according to JPMorgan Chase & Co’s Abiel Reinhart. Initial jobless claims “on balance continue to look quite low, which is a good sign for the job market,” he wrote in a research note. 

In Asia, data set for release includes S&P Global PMI figures for Hong Kong, inflation in the Philippines and retail sales in Singapore.

  - Bloomberg