By Scott DiSavino
(Reuters) -Oil prices climbed about 1% to a two-week high on Friday as the intensifying war in Ukraine this week boosted the market's geopolitical risk premium.
Brent futures rose $1.05, or 1.4%, to $75.28 a barrel by 1:15 p.m. EST (1815 GMT), while U.S. West Texas Intermediate (WTI) crude rose $1.22, or 1.7%, to $71.32.
That put both crude benchmarks up about 6% for the week and on track for their highest closes since Nov. 7 as Moscow steps up its Ukraine offensive after Britain and the U.S. allowed Kyiv to strike deeper into Russia with their missiles.
"The Russia-Ukraine escalation has raised geopolitical tensions beyond levels seen during the year-long conflict between Israel and Iran-backed militants," said Saxo Bank analyst Ole Hansen.
President Vladimir Putin said Russia would keep testing its new Oreshnik hypersonic missile in combat and had a stock ready for use. Russia fired the missile into Ukraine, prompted by Ukraine's use of U.S. ballistic missiles and British cruise missiles to hit Russia.
"What the market fears is accidental destruction in any part of oil, gas and refining that not only causes long-term damage but accelerates a war spiral," said PVM analyst John Evans.
The U.S., meanwhile, imposed new sanctions on Russia's Gazprombank as President Joe Biden steps up actions to punish Moscow for its invasion of Ukraine before he leaves office on Jan. 20.
The Kremlin said the new U.S. sanctions were an attempt by Washington to hinder the export of Russian gas, but noted that a solution would be found.
The U.S. also banned food, metals and other imports from about 30 more Chinese companies over alleged forced labor involving the Uyghurs.
China, the world's biggest oil importer, announced policy measures this week to boost trade, including support for energy product imports, amid worries over U.S. President-elect Donald Trump's threats to impose tariffs.
China's crude oil imports were set to rebound in November, according to analysts, traders and ship tracking data.
Oil imports also increased in India, the world's third biggest oil importer, as domestic consumption increased, according to government data.
CAPPING PRICE GAINS
Pressuring prices on Friday, euro zone business activity took a surprisingly sharp turn for the worse this month as the bloc's dominant services industry contracted and manufacturing sank deeper into recession.
In contrast, S&P Global (NYSE:SPGI) said its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, increased to the highest level since April 2022, with the services sector providing the bulk of the increase.
But with those business activity gauges moving in opposite directions in the U.S. and Europe, the U.S. dollar jumped to a two-year high versus a basket of other currencies.
A stronger greenback makes oil more expensive in other countries, which can reduce demand.
In Germany, the biggest economy in Europe, the economy grew less than previously estimated in the third quarter, the statistics office reported on Friday.