Oil Prices Surge Over 4% as Renewed Iran Tensions and Inventory Draw Revive Supply Fears

Oil prices rallied more than 4% on Wednesday, reversing a multi-day slide as a fresh missile attack by Iran on U.S. forces in the Middle East brought supply disruption fears back into sharp focus. The surge was further supported by industry data indicating a significant draw in U.S. crude stockpiles, signaling tighter market conditions.

By 20:47 ET (00:47 GMT), Brent crude futures had climbed 4.2% to $87.62 a barrel, while West Texas Intermediate (WTI) crude futures rose 4.1% to $82.49 a barrel. The gains mark a stark reversal after both benchmarks had fallen roughly 15% over the previous three sessions.

Geopolitical Risks Return to Forefront

Market sentiment shifted abruptly after Iran launched a wave of ballistic missiles targeting U.S. military positions in the region. While U.S. Central Command reported that all missiles were intercepted, the attack ended a period of relative calm and dashed hopes that diplomatic efforts were gaining traction.

Concerns over crucial shipping lanes also persist. According to ANZ analysts, efforts to reopen the Strait of Hormuz have stalled, with tanker traffic through the strategic waterway remaining subdued. The attack unwound much of the optimism that had built following recent diplomatic meetings, reigniting the geopolitical risk premium in oil prices.

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Supply Indicators Point to Tighter Market

Adding to the bullish momentum, the American Petroleum Institute (API) reportedly estimated that U.S. crude inventories fell by 3.3 million barrels last week. This larger-than-expected draw suggests resilient demand and tightening supply ahead of official government data.

Prices also found support from reports that the OPEC+ alliance is considering a pause on planned production increases for three months starting in October. Such a move would keep supply constrained for longer, further underpinning the market after a period of selling pressure driven by hopes of a U.S.-Iran de-escalation.