[WORLD] Oil prices surged more than 1% on Wednesday following reports that Israel is preparing a potential strike on Iranian nuclear facilities, sparking fears of supply disruptions in the Middle East—a region crucial to global energy production.
Brent crude futures for July delivery advanced 86 cents, or 1.32%, to $66.24 a barrel by 0003 GMT. Meanwhile, U.S. West Texas Intermediate (WTI) crude for July rose 90 cents, or 1.45%, to $62.93 per barrel.
The escalation in geopolitical tensions comes at a time of heightened uncertainty in oil markets, already strained by ongoing OPEC+ production cuts and erratic demand forecasts. Analysts caution that any military conflict in the region could drive a sustained rally in crude prices, especially if Iran’s growing oil exports—facilitated by a softer stance on U.S. sanctions—are disrupted.
CNN reported Tuesday that the United States has obtained new intelligence suggesting Israel is preparing to target Iranian nuclear facilities, citing multiple U.S. officials. However, it remains unclear whether Israeli authorities have made a definitive decision on launching a strike.
This potential move follows weeks of intensifying rhetoric between Israel and Iran, including recent threats from Tehran to retaliate over alleged Israeli actions in Syria. Market participants are now closely monitoring the risk of a broader regional conflict, which could threaten not only Iranian production but also supplies from nearby Gulf nations allied with the West.
U.S. crude futures jumped more than $2 a barrel on the news, while Brent posted gains of over $1, underscoring the market's sensitivity to geopolitical developments.
As the third-largest producer within OPEC, any disruption to Iran’s output could ripple across global supply chains. There are also growing concerns that Iran may respond by attempting to block the Strait of Hormuz, a strategic maritime corridor through which a significant portion of Middle Eastern oil—including from Saudi Arabia, Kuwait, Iraq, and the UAE—is transported.
Though Iran has made similar threats in the past during periods of heightened tension, such actions would likely trigger a strong international reaction. Roughly 20% of the world’s oil supply passes through the Strait, making it one of the most vital chokepoints for global energy flow.
In contrast to rising geopolitical risks, some signs point to improving supply conditions. According to market sources citing American Petroleum Institute (API) data, U.S. crude inventories rose by 2.5 million barrels in the week ending May 16, even as gasoline and distillate stocks declined.
The increase in stockpiles comes as U.S. refiners ramp up activity ahead of the summer driving season, which could place upward pressure on gasoline prices in the weeks ahead. The seasonal demand uptick, combined with ongoing geopolitical volatility, adds complexity to the short-term oil market outlook.
Investors are now awaiting official inventory data from the U.S. Energy Information Administration (EIA), due later on Wednesday. Separately, Kazakhstan’s oil production has increased by 2% so far in May, according to an industry source on Tuesday—defying calls from OPEC+ for the country to curb its output.
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