Oil prices rose by more than 3% on Wednesday after fresh military escalation between the United States and Iran heightened concerns over crude supplies from the Middle East, while a decline in U.S. crude inventories added further support to the market.
Brent crude futures gained $2.70, or 3.2%, to $86.79 a barrel, while U.S. West Texas Intermediate (WTI) crude climbed $2.65, or 3.3%, to $81.91 a barrel.
The gains followed joint airstrikes by the United States and Saudi Arabia on Iran-backed groups in Iraq, alongside the interception of Iranian ballistic missiles reportedly targeting U.S. forces in the region.
Analysts at ING said the renewed tensions had weakened expectations for a quick de-escalation in the Gulf, helping to lift oil prices after three consecutive sessions of decline.
The United States and Saudi Arabia blamed Iran-backed groups for recent drone attacks on Saudi oil facilities, while Tehran rejected the allegations and warned that linking it to the attacks would be a “major miscalculation.”
Concerns over supply disruptions also persisted as tanker traffic through the Strait of Hormuz remained subdued.
Only five commodity vessels reportedly transited the strategic waterway on Tuesday, well below normal levels.
Efforts to ease tensions through regional diplomacy also appeared to stall after Iran rejected an Omani proposal, backed by Gulf states, for joint management of the Strait of Hormuz.
Suvro Sarkar, Head of Energy Research at DBS Bank, said Brent crude could continue trading within an $80 to $100 per barrel range in the near term as geopolitical tensions fluctuate.
Supporting prices further, market sources said U.S. crude inventories fell by about 3.3 million barrels in the week ended July 24, while OPEC+ is reportedly considering pausing planned production increases for three months from October after completing the scheduled return of previously withheld output.
