Oil Prices Rise Amid Rising US-Iran Tensions and Iraq Strikes

Oil prices rose by more than $3 a barrel on Wednesday as tensions increased in the Middle East following joint US and Saudi strikes in Iraq and the interception of Iranian ballistic missiles aimed at US forces in the region. A drop in US crude inventories also supported the rise in oil prices.

By 0300 GMT, Brent crude futures had increased by $3.30, or 3.9%, to $87.39 a barrel. US West Texas Intermediate (WTI) crude also rose by $3.05, or 3.8%, to $82.31 a barrel.

“Renewed strength comes after the US said it intercepted a ⁠surprise attack on US troops,” ING analysts said in a note.

“Saudi Arabia intercepted drones from Iranian-backed groups in Iraq, which were targeting Saudi energy infrastructure,” they said, adding that US and Saudi forces launched strikes on weapon sites across eastern Iraq.

Analysts said the latest developments have reduced hopes for a quick easing of tensions in the Persian Gulf. Concerns about possible disruptions to oil supplies have also increased, putting further pressure on energy markets.

The US military said it intercepted ballistic missiles launched by Iran towards US forces in the Middle East in what Washington called “an attempted surprise attack” by Tehran.

Iran’s elite Revolutionary Guards ⁠later said they fired several ballistic missiles at a US air base and military Central Command centre in Jordan.

Saudi Arabia also said its armed forces, in coordination with US Central Command, carried out “targeted strikes” against Iran-backed groups in Iraq. Saudi Arabia blamed these groups for drone attacks targeting the kingdom’s oil facilities.

Meanwhile, US crude inventories fell by about 3.3 million barrels during the week ended July 24, according to market sources who cited data from the American Petroleum Institute. Official inventory figures from the Energy Information Administration are expected later on Wednesday.

The decline in US crude stocks provided additional support to oil prices. Lower inventories can signal stronger demand or tighter supply conditions in the market.

Oil prices also received support from expectations that OPEC+ may pause increases in oil production for three months starting in October. Sources told ⁠Reuters that the producer group is likely to take the step after completing its planned return of oil barrels following earlier voluntary production cuts.