Global oil prices climbed further on Wednesday as fresh military incidents involving the United States and Iran reignited fears of a potential escalation in Middle East tensions, raising concerns about possible disruptions to crude supply through the strategically vital Strait of Hormuz.
Brent crude futures edged up 15 cents, or 0.2 percent, to $67.48 per barrel by 0730 GMT, while U.S. West Texas Intermediate (WTI) crude gained 28 cents, or 0.4 percent, to trade at $63.49 per barrel. The gains followed a near 2 percent rally in both benchmarks on Tuesday amid heightened geopolitical risk.
Market sentiment was rattled after the U.S. military confirmed it had shot down an Iranian drone that it said “aggressively” approached the Abraham Lincoln aircraft carrier in the Arabian Sea. The incident, first reported by Reuters, added to growing unease over rising confrontations between Washington and Tehran.
In a separate development, Iranian gunboats were reported to have approached a U.S.-flagged oil tanker in the Strait of Hormuz, north of Oman, according to maritime sources and a security consultancy. The narrow waterway, which links the Persian Gulf to the Gulf of Oman, is one of the world’s most critical oil transit routes, through which a significant portion of the global crude supply passes daily.
The Strait of Hormuz is particularly crucial for major OPEC producers, including Saudi Arabia, Iran, the United Arab Emirates, Kuwait, and Iraq, which ship most of their oil exports through the passage, largely to Asian markets. Iran was the third-largest crude producer within OPEC in 2025, based on data from the U.S. Energy Information Administration (EIA).
Analysts said the renewed tensions have prompted traders to factor in a geopolitical risk premium. “Uncertainty about how these talks will play out means the market will likely continue to price in some risk premium,” ING commodity strategists said in a note on Wednesday.
Diplomatic uncertainty also weighed on sentiment, as Iran insisted that planned talks with the U.S. this week be held in Oman rather than Turkey and limited strictly to bilateral discussions on nuclear issues. The demands have cast doubt on whether the meeting will go ahead as scheduled.
“Heightened tensions in the Middle East provided support to the oil market,” said Satoru Yoshida, a commodity analyst at Rakuten Securities.
Oil prices also drew support from industry data pointing to a sharp decline in U.S. crude inventories. According to sources citing figures from the American Petroleum Institute (API), U.S. stockpiles fell by more than 11 million barrels last week, defying expectations of a build. Official inventory data from the EIA is due later on Wednesday, with analysts surveyed by Reuters having forecast a rise in crude stocks.
Beyond Middle East developments, prices were buoyed by optimism over global demand after the United States and India reached a trade agreement that boosted confidence in energy consumption. At the same time, ongoing Russian attacks on Ukraine continued to stoke concerns that sanctions on Moscow’s oil exports could persist longer than expected.
“India’s trade agreement with the U.S. to halt purchases of Russian crude, along with the ongoing Russia-Ukraine war, is also providing support,” Yoshida said, adding that WTI prices are likely to hover around the $65-per-barrel mark in the near term.
With geopolitical risks, supply uncertainties, and mixed demand signals converging, analysts expect oil markets to remain volatile in the days ahead as traders closely monitor both diplomatic developments and upcoming U.S. inventory data.
WHAT YOU SHOULD KNOW
Oil prices rose as escalating U.S.–Iran tensions, particularly around the Strait of Hormuz, heightened fears of supply disruptions, with additional support coming from a sharp drop in U.S. crude inventories and geopolitical risks linked to Russia and global trade dynamics.
