Middle East tensions drive oil prices higher amid supply fears

Oil prices climbed early Wednesday amid heightened tensions in the Middle East, particularly in the Strait of Hormuz, where recent attacks have raised concerns over supply disruptions. Reports of increased strikes on vessels in the region, along with escalating conflicts between the Iran-backed Houthis and the Saudi-backed government in Yemen, fueled fears of potential disruptions to crude oil shipments. The Houthis claimed responsibility for an attack on a major Saudi refinery, further intensifying market anxieties.

Brent crude rose 0.59% to $89.97 a barrel by 19:38 ET (23:38 GMT), building on gains from Tuesday when it settled up 0.8% at $101.08 a barrel. Despite these increases, reports of improving oil supplies from the Middle East and planned emergency supply releases by the Group of Seven limited larger price surges. Iran has escalated its attacks in the Strait of Hormuz, threatening to keep the waterway closed to shipping until the U.S. meets its demands.

Meanwhile, the Saudi-backed Yemen government reclaimed several key points along the Red Sea from the Houthis, a move that could eventually boost crude supplies through the Bab el-Mandeb strait. However, the Houthis retaliated by targeting key Saudi facilities, including an Aramco 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, reversing three weeks of builds.