Middle East Tensions and US Inventory Drop Boost Oil Prices

Oil prices climbed early Wednesday as tensions in the Middle East escalated, raising concerns over potential supply disruptions. Reports of increased attacks in the Strait of Hormuz heightened fears, while industry data indicated a decline in U.S. inventories. The West Texas Intermediate (WTI) crude futures rose 0.59% to $89.97 a barrel by 19:38 ET (23:38 GMT), extending gains from Tuesday, when fighting between the Iran-backed Houthis and the Saudi Arabia-backed government in Yemen also stoked supply worries.

The Houthis claimed to have attacked a major Saudi refinery, further escalating tensions. Reports of improving oil supplies from the Middle East limited larger gains, as did planned emergency supply releases by the Group of Seven. Iran has intensified attacks in the Strait of Hormuz, threatening to keep the waterway closed until the U.S. meets its demands.

Meanwhile, the Saudi-backed Yemen government retook several key points along the Red Sea from the Houthis, which could eventually boost crude supplies through the Bab el-Mandeb strait. However, the Houthis retaliated by attacking targets in Saudi Arabia, including a refinery in Riyadh.

In the U.S., oil inventories fell by 2.09 million barrels in the week to October 2, according to data from the American Petroleum Institute. This decline followed three weeks of builds and comes as American producers prepare for potential weather-related disruptions in the Gulf of Mexico.