By Alex Lawler

LONDON (Reuters) -Oil rose over 1% on Friday as heightened tensions in the Middle East raised the risk of supply disruptions from the oil-producing region, though the market is set for a weekly loss on expectations of fewer U.S. interest rate cuts this year.

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.

futures were up $1.10, or 1.2%, to $90.84 a barrel by 1200 GMT, while U.S. West Texas Intermediate crude futures rose $1.15, or 1.4%, to $86.17. Both were headed for a small weekly loss of less than 1%.

Prices 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.

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.

Friday’s gains 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.

U.S. Federal Reserve officials signalled on Thursday that there was no rush to cut interest rates as U.S. inflation persisted.