Oil prices remained close to seven-month highs on Wednesday, supported by investor concerns that escalating tensions between the United States and Iran could threaten global supply, with diplomatic talks between the two sides scheduled for Thursday.
Brent crude futures rose 42 cents, or 0.6%, to $71.19 per barrel at 07:30 GMT, while U.S. West Texas Intermediate (WTI) futures gained 41 cents, or 0.6%, to $66.04 per barrel.
Brent last reached these levels on July 31, while WTI touched its highest point since August 4 earlier this week. Both benchmarks have stayed near those peaks as the United States deployed military assets in the Middle East in an effort to push Iran toward negotiations over its nuclear and ballistic missile programmes.
A prolonged confrontation could disrupt exports from Iran — the third-largest crude producer within the Organization of the Petroleum Exporting Countries — as well as supplies from other key producers across the Middle East.
U.S. President Donald Trump outlined the rationale for potential military action during his State of the Union address on Tuesday, stating he would not allow what he described as the world’s largest sponsor of terrorism to obtain nuclear weapons.
“This uncertainty means the market will continue to price in a large risk premium and remain sensitive to any fresh developments,” ING commodities strategists said on Wednesday.
U.S. representatives Steve Witkoff and Jared Kushner are expected to meet an Iranian delegation in Geneva on Thursday for a third round of negotiations.
Iranian Foreign Minister Abbas Araqchi said Tuesday that an agreement with Washington was “within reach, but only if diplomacy is given priority”.
“(U.S.) President (Donald) Trump has warned that without a deal, there will be ’very bad consequences’. Whether (Iran’s) concessions will meet the U.S.’s ’zero enrichment’ red line remains to be seen,” said Tony Sycamore, market analyst at IG, in a note.
Amid rising geopolitical tensions, Iran and China have accelerated discussions over potential purchases of Chinese anti-ship cruise missiles, according to Reuters sources, weapons that could target U.S. naval forces currently positioned near Iran’s coastline.
Experts note that such missiles would strengthen Iran’s strike capabilities and pose a greater threat to U.S. naval deployments in the region.
While geopolitical risks have supported oil prices, markets are also facing concerns about growing inventories as global supply continues to outpace demand.
Market sources said the American Petroleum Institute reported a sharp increase of 11.43 million barrels in U.S. crude stockpiles for the week ending February 20.
However, gasoline and distillate inventories declined during the same period, according to the API data cited by sources.
Official inventory figures from the U.S. Energy Information Administration are scheduled for release later on Wednesday.