Oil prices moved higher on Wednesday, supported by renewed geopolitical tensions in the Middle East and signs that diplomatic efforts between the United States and Iran have stalled. Additional support came from industry data pointing to a larger-than-expected drawdown in U.S. crude stockpiles.
By 05:05 ET (09:05 GMT), Brent crude futures for August delivery had gained 2.5% to $98.35 a barrel, while U.S. West Texas Intermediate (WTI) crude futures advanced 2.7% to $96.25 a barrel.
Both benchmark contracts had already posted gains of more than 1% during the previous trading session.
Geopolitical Risks Remain the Market’s Primary Focus
Energy traders continued to monitor developments across the Middle East, where optimism surrounding a potential breakthrough in U.S.-Iran negotiations has faded following a new wave of military activity involving both countries.
At the same time, Israeli forces maintained operations in southern Lebanon, while Kuwaiti authorities reported that air defense systems intercepted missiles and drones launched from Iran.
Further heightening concerns, U.S. Central Command announced via X on Tuesday that American forces had conducted strikes on Iran’s Qeshm Island, located close to the strategically important Strait of Hormuz.
The waterway remains one of the world’s most critical energy corridors, carrying roughly 20% of global oil supplies.
Diplomatic Progress Appears Limited
Market sentiment was also influenced by reports indicating that direct communications between Washington and Tehran have slowed in recent days.
Although U.S. President Donald Trump has continued to insist that negotiations remain active, Iranian media reports have questioned the likelihood of reaching an agreement in the near future.
The lack of visible diplomatic progress has prompted traders to increase the geopolitical risk premium built into oil prices.
Attention will also turn to a new round of discussions involving Israel and Lebanon, scheduled to take place on Wednesday.
Sharp U.S. Inventory Draw Adds Support
Beyond geopolitical developments, oil markets received a boost from fresh inventory data released by the American Petroleum Institute (API).
The industry group reported that U.S. crude inventories fell by 6.8 million barrels during the week ended May 29, significantly exceeding analyst expectations for a decline of 3.6 million barrels.
The larger-than-anticipated drawdown pointed to tightening supply conditions and reinforced the bullish tone across energy markets.
Investors are now awaiting official stockpile figures from the U.S. Energy Information Administration (EIA), which are due later in the day and could provide further direction for crude prices.
Key U.S. Economic Data Also in Focus
In addition to inventory figures, traders will be closely watching several important U.S. economic releases scheduled for Wednesday.
Among the reports due are the ADP private-sector employment survey, the ISM services index and factory orders data.
These indicators are expected to provide fresh insight into the health of the U.S. economy and labor market ahead of Friday’s highly anticipated nonfarm payrolls report, which could influence expectations for monetary policy and broader commodity demand.
Markets Weigh Supply Risks Against Economic Outlook
With geopolitical uncertainty intensifying, crude inventories falling and major economic data still to come, oil markets remain caught between concerns over supply disruptions and questions surrounding future demand growth.
For now, the balance of factors continues to favor higher prices, as traders assess the implications of ongoing Middle East instability and the potential impact on global energy flows.