Crude oil prices surged on Wednesday following media reports suggesting Israel may be preparing for a military strike on Iran’s nuclear facilities – a development that has reignited concerns over potential supply disruptions in the region.
As of 07:35 ET, Brent crude futures rose 0.7% to $65.82 per barrel, while West Texas Intermediate (WTI) crude advanced 0.8% to $62.52 per barrel.
Heightened Tensions in the Middle East
According to a CNN report published Tuesday, Israel is actively making contingency plans for a possible attack on Iranian nuclear infrastructure. Citing several U.S. officials familiar with intelligence reports, the article states that although Israeli leadership hasn’t made a final decision, the chances of a strike have “gone up significantly” in recent months.
“The news, based on US intelligence, may signal a significant escalation, prompting the oil market to price in a larger geopolitical risk premium for the region,” analysts at ING wrote.
“Such an escalation would not only put Iranian supply at risk, but also in large parts of the broader region,” they added.
The timing of this report is especially critical as the U.S. and Iran continue nuclear negotiations, with Washington insisting Tehran suspend its uranium enrichment activities over fears of potential nuclear armament. Iran, for its part, has remained firm, declaring its enrichment efforts as “absolutely non-negotiable.”
CNN noted that any future nuclear agreement under President Donald Trump that doesn’t entirely dismantle Iran’s enrichment capability could increase the likelihood of Israeli military action.
U.S. Crude Stockpiles Unexpectedly Rise
In addition to geopolitical tensions, investors also reacted to fresh supply data. The American Petroleum Institute (API) reported an unexpected 2.5 million-barrel build in U.S. crude inventories for the week ending May 16 – contrary to expectations for a 1.9 million-barrel draw. This follows a 4.3 million-barrel increase the week prior.
Meanwhile, gasoline inventories dropped by 3.2 million barrels, and distillate stockpiles – which include diesel and heating oil – fell by 1.4 million barrels.
“Inventory data continues to suggest a tightening middle distillate market,” said ING analysts.
All eyes now turn to the U.S. Energy Information Administration (EIA), which is scheduled to release official data later today, for further confirmation.