Oil prices held close to seven-month highs on Wednesday as investors remained cautious about the risk of supply disruptions linked to rising tensions between the United States and Iran, with diplomatic talks between the two countries scheduled for Thursday.
Brent crude futures gained 42 cents, or 0.6%, to $71.19 per barrel at 07:30 GMT, while U.S. West Texas Intermediate (WTI) futures climbed 41 cents, also 0.6%, to $66.04 per barrel.
Brent last reached comparable levels on July 31, while WTI touched its highest mark since August 4 earlier this week. Prices have stayed elevated as Washington deployed military forces across the Middle East in an effort to pressure Iran into negotiations over its nuclear and ballistic missile programmes.
Any prolonged escalation could disrupt exports from Iran — the third-largest crude producer within the Organization of the Petroleum Exporting Countries — and potentially affect output from other major producers across the region.
U.S. President Donald Trump briefly outlined the justification for potential military action during Tuesday’s State of the Union address, stating that he would not allow what he described as the world’s leading sponsor of terrorism to obtain nuclear weapons.
“This uncertainty means the market will continue to price in a large risk premium and remain sensitive to any fresh developments,” ING commodities strategists said on Wednesday.
U.S. envoys Steve Witkoff and Jared Kushner are expected to meet Iranian officials in Geneva on Thursday for a third round of negotiations.
Iranian Foreign Minister Abbas Araqchi said Tuesday that an agreement with Washington was “within reach, but only if diplomacy is given priority”.
“(U.S.) President (Donald) Trump has warned that without a deal, there will be ’very bad consequences’. Whether (Iran’s) concessions will meet the U.S.’s ’zero enrichment’ red line remains to be seen,” said Tony Sycamore, market analyst at IG, in a research note.
Amid heightened tensions, Iran and China have accelerated discussions regarding a potential purchase of Chinese anti-ship cruise missiles, according to Reuters sources, weapons that could target U.S. naval forces deployed near Iran’s coastline.
Analysts note that such systems would enhance Iran’s strike capabilities and increase risks for U.S. naval assets operating in the area.
While geopolitical risks have helped support oil prices, traders are also monitoring rising inventories as global supply continues to outpace demand.
Market sources reported that the American Petroleum Institute recorded a sharp increase of 11.43 million barrels in U.S. crude stockpiles for the week ending February 20.
However, gasoline and distillate inventories declined during the same period, according to the API data cited by sources.
Official inventory data from the U.S. Energy Information Administration is expected later on Wednesday.
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