Oil Prices Ease After 8% Surge on Mideast Tensions, US Inventory Draw

Oil prices edged lower in early Asian trade on Thursday, a modest pullback after futures surged in the previous session on renewed geopolitical risk in the Middle East and signs of tightening U.S. supplies.

After Wednesday's rally, Brent futures for September delivery fell 0.9% to $89.92 per barrel, while West Texas Intermediate (WTI) crude futures declined 0.6% to $83.94 per barrel, according to Investing.com data as of 00:50 GMT.

Geopolitical Risk Premium Spikes

The previous day's sharp gains, which saw Brent futures soar nearly 8% and WTI climb 6.6%, were driven by an escalation of hostilities in the Middle East. The rally followed reports that Iran launched ballistic missiles at U.S. forces, which were intercepted. The action prompted retaliatory strikes by U.S. and Saudi forces against Iran-backed militias in Iraq.

U.S. President Donald Trump told Fox News on Wednesday that Iran would be "hit very hard," undermining hopes for a diplomatic resolution. Tensions have also broadened across the region, with Egyptian authorities reporting drone strikes on natural gas vessels and Iran-aligned Houthi forces intensifying attacks on commercial shipping in the Red Sea, a critical maritime chokepoint.

US Stockpiles Hit Multi-Year Low

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Adding fundamental support to prices, the U.S. Energy Information Administration (EIA) reported a significant tightening in domestic supplies. According to the agency's weekly report, U.S. crude inventories fell by 7.2 million barrels last week.

This draw was substantially larger than market expectations and brought national stockpiles to their lowest level since 2018. The data reinforces the narrative of a tight physical market in the world's largest oil-consuming nation, providing a strong bullish signal that helped fuel Wednesday's price surge.

Market Weighs Conflicting Signals

Thursday's slight decline suggests some profit-taking by investors after the dramatic run-up. The market remains on edge, balancing the clear fundamental support from shrinking U.S. inventories against the highly volatile and unpredictable geopolitical situation in the Middle East, which threatens significant supply disruptions.