Oil prices moved higher on Wednesday, extending recent gains as escalating tensions across the Middle East and fading hopes for a diplomatic breakthrough between the United States and Iran continued to fuel supply concerns. Stronger-than-expected inventory data from the United States also provided additional support to the market.
At 05:05 ET (09:05 GMT), Brent crude futures for August delivery were up 2.5% at $98.35 per barrel, while U.S. West Texas Intermediate (WTI) futures gained 2.7% to $96.25 per barrel.
Both benchmarks had already risen by more than 1% during Tuesday’s session.
Rising Regional Tensions Keep Energy Markets on Edge
Market participants remained focused on developments in the Middle East, where renewed military activity has reduced expectations for a near-term agreement between Washington and Tehran.
Israeli forces continued operations in southern Lebanon, while Kuwaiti officials reported that air defense systems had intercepted missiles and drones launched from Iran.
Meanwhile, the U.S. Central Command confirmed on Tuesday that American forces had carried out strikes on Iran’s Qeshm Island, located close to the Strait of Hormuz, one of the world’s most strategically important shipping routes for crude oil exports.
Approximately one-fifth of global oil supplies move through the narrow waterway, making any threat to regional stability a major concern for energy markets.
Prospects for a U.S.-Iran Agreement Fade
Investor attention has increasingly shifted toward the apparent lack of progress in negotiations between the United States and Iran.
Reports suggested that communications between the two sides have slowed significantly in recent days, despite U.S. President Donald Trump continuing to insist that discussions remain active.
Iranian media outlets have expressed skepticism about the likelihood of a near-term breakthrough, prompting traders to assign a higher geopolitical risk premium to oil prices.
A new round of discussions involving Israel and Lebanon is expected to take place on Wednesday, although expectations for meaningful progress remain limited.
U.S. Inventory Data Reinforces Bullish Sentiment
Supporting the upward move in crude prices, fresh data from the American Petroleum Institute (API) pointed to a substantial drawdown in U.S. oil inventories.
According to the report, crude stockpiles declined by 6.8 million barrels during the week ended May 29, well above analyst forecasts calling for a reduction of 3.6 million barrels.
The larger-than-anticipated decline suggested tighter supply conditions and added momentum to the ongoing rally in oil markets.
Traders are now awaiting official inventory figures from the U.S. Energy Information Administration (EIA), scheduled for release later in the day.
Economic Reports Could Influence Demand Outlook
In addition to inventory data, investors are preparing for several key U.S. economic releases that could provide insight into future energy demand.
Among the reports due on Wednesday are the ADP private-sector employment survey, the ISM services index and factory orders data.
The figures are expected to offer a clearer picture of economic activity ahead of Friday’s closely watched nonfarm payrolls report, which could influence expectations for interest rates, growth and commodity consumption.
Supply Concerns Continue to Outweigh Demand Uncertainty
With geopolitical risks mounting, U.S. inventories tightening and critical economic data still ahead, oil traders continue to navigate a market shaped by competing supply and demand forces.
For now, concerns over potential disruptions to global energy flows appear to be providing the strongest influence on prices, helping crude maintain its upward trajectory despite ongoing uncertainty surrounding the broader economic outlook.
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