Oil Prices Hold Near Five-Week Highs as US-Iran Tensions Escalate

Oil prices held near multi-week highs during European trading on Thursday, extending a three-day rally fueled by escalating military conflict between the United States and Iran. Comments from U.S. President Donald Trump suggesting the action would not be prolonged have only partially eased market concerns over potential supply disruptions from the critical Middle East region.

As of 7:29 AM ET, Brent crude futures for November delivery were up 1% at $96.62 per barrel, while West Texas Intermediate (WTI) crude rose 1.6% to $92.48 per barrel. Both benchmarks had reached five-week highs over the previous three sessions.

Geopolitical Tensions Rattle Supply Outlook

The primary driver for the recent price surge is the renewal of direct military engagement. The U.S. military conducted strikes against Iran's southern coast on Wednesday, prompting retaliatory attacks from Tehran on several U.S. targets in the area in the most intense exchange since July.

President Trump stated Wednesday that the U.S. military operation against Iran "won't last too long," somewhat tempering immediate fears of a wider conflict. He specified that the strikes targeted Iranian radar systems, missile facilities, and capabilities related to laying mines in the Strait of Hormuz, a vital chokepoint for global oil shipments.

Traffic through the strait remains volatile. U.S. Energy Secretary Chris Wright reported that 17 million barrels of crude transited the waterway on Monday, the highest daily volume since the conflict began. However, preliminary data from Kpler showed that on Tuesday, only four commodity vessels passed through, a sharp drop from the 10-day average of approximately 13 ships per day.

US Inventories Signal Tighter Market

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Adding to the bullish sentiment, U.S. inventory data provided a supportive signal. The Energy Information Administration (EIA) reported that commercial crude oil inventories fell by 4.5 million barrels last week, marking the first decline in five weeks and defying analyst expectations for a slight increase.

Data on refined products was mixed. Gasoline stockpiles decreased by 1.2 million barrels, while distillate inventories, which include diesel and heating oil, saw a build of approximately 800,000 barrels.

Market Awaits OPEC+ Decision

Investors are also looking ahead to a meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+) scheduled for Sunday. The consensus expectation is that the producer group will maintain its current output policy for October.

This follows the group's recent completion of a plan to phase out 1.65 million barrels per day of production cuts. For September, OPEC+ had already agreed to a modest production quota increase of 188,000 barrels per day.