Investing.com-- Oil prices fell slightly in Asian trade on Friday as traders remained on edge over slowing growth and weakening demand, although increased military action between Russia and Ukraine limited losses.

Oil was also headed for its first weekly gain in three, amid growing expectations that global supplies will be tighter than initially expected this year. Bets on more U.S. sanctions against Iran and Russia were the biggest driver of this notion.

Brent oil futures for August fell 0.1% to $65.27 a barrel, while West Texas Intermediate crude futures fell 0.1% to $62.39 a barrel by 21:05 ET (01:05 GMT).

Oil heads for weekly gains, but demand fears remain

Brent and WTI futures were trading up between 2% and 4.5% this week, helped by growing bets that global supplies will tighten in the coming months.

Reports that the U.S. was considering more sanctions against Russia drove this notion, as did signs of strain in U.S.-Iran nuclear talks.

Oil markets were also encouraged by the Organization of Petroleum Exporting Countries and allies (OPEC+) deciding to raise supply by an as-expected margin in July.

But oil still faced some headwinds, with a key weight being sustained concerns over slowing demand, especially amid growing signs of softening global economic conditions.

A host of weak economic prints from top oil consumers U.S. and China raised questions over demand, especially as the world’s biggest economies remained engaged in a tariff exchange. Outsized builds in U.S. oil product inventories also added to uncertainty over demand.

U.S. President Donald Trump and Chinese President Xi Jinping held a call on Thursday that could mark a resurgence in U.S.-China trade talks, although markets were still holding out for a more permanent trade deal.

Fears of Trump imposing more tariffs, however, still remained in play.

Russia-Ukraine escalation supports prices

Reports early-Friday showed Russia had launched a series of missiles and drone strikes against Ukraine, likely retaliation for several devastating attacks by Kyiv on Russian infrastructure earlier this week.

The attacks further undermined U.S. attempts to broker a ceasefire, with Moscow’s latest offensive reportedly coming just days after Trump and Russian President Vladimir Putin spoke.

But expectations of sustained hostilities between Moscow and Kyiv are likely to draw more U.S. attempts at pressuring Russia into a ceasefire, which could involve stricter sanctions on Russia’s oil industry.

Reports earlier this week showed a bipartisan push for more sanctions against Russian oil, this time targeting major buyers China and India.