Oil Prices Rebound on Escalating Middle East Tensions

Oil prices rebounded sharply on Wednesday after a brief lull in Middle East fighting gave way to fresh missile attacks and joint US-Saudi strikes in Iraq. Brent futures rose $3.30, or 3.9%, to $87.39 a barrel by 0300 GMT, while West Texas Intermediate gained $3.05, or 3.8%, to $82.31.

The escalation of tensions in the region has weakened expectations for a quick de-escalation in the Persian Gulf, according to ING analysts. The Strait of Hormuz normally handles about one-fifth of globally traded oil, and renewed Houthi activity near the Red Sea raises the prospect of disruption at a second major shipping corridor.

American Petroleum Institute figures indicated nationwide crude inventories fell by about 3.3 million barrels in the week ended July 24, further tightening the market's balance. A confirmed draw would point to firm demand for available barrels even as conflict risk complicates imports and shipping.

OPEC+ is considering a three-month pause in production increases from October, which could leave roughly 2 million barrels a day of wider group curbs in place. The prospect of steady quotas removes one potential source of additional supply, according to UBS analyst Giovanni Staunovo.