By: Economy Middle East

Oil prices surged more than $3 a barrel on Wednesday after joint U.S.-Saudi strikes in Iraq and the interception of Iranian ballistic missiles targeting U.S. forces in the Middle East. A decline in U.S. crude inventories further supported oil prices.

As of 4:07 GMT, Brent crude futures climbed $3.74, or 4.45 percent, to $87.83 a barrel, while U.S. West Texas Intermediate (WTI) crude gained $3.43, or 4.33 percent, to trade at $82.69 a barrel.

Mideast tensions escalate

Oil prices extended their gains after the U.S. military said it intercepted Iranian ballistic missiles targeting U.S. forces in the Middle East, in what Washington described as an attempted surprise attack by Tehran. Iran’s Islamic Revolutionary Guard Corps later said it had launched several ballistic missiles at a U.S. air base and the U.S. Central Command headquarters in Jordan.

The latest escalation followed a period of growing optimism that diplomatic efforts could gain momentum after Israeli Prime Minister Benjamin Netanyahu met with U.S. President Donald Trump in Washington.

Trump later said there was a good chance negotiations with Iran would move forward. However, Tehran rejected those remarks, insisting it was neither seeking talks with Washington nor pursuing a ceasefire.

Adding to geopolitical tensions, Saudi Arabia said its armed forces, in coordination with U.S. Central Command, carried out targeted strikes against Iran-backed groups in Iraq, blaming them for drone attacks on the Kingdom’s oil facilities.

Supply concerns grow as U.S. crude inventories fall

Efforts to restore normal shipping through the Strait of Hormuz also remained at an impasse after Iran rejected an Omani proposal to establish a joint framework for managing maritime traffic through the strategic waterway.

Meanwhile, tanker traffic through the strait stayed below normal levels, while concerns over regional energy security persisted after Saudi Arabia said it had intercepted drones and missiles targeting oil facilities in its Eastern Province.

Supply concerns also supported oil prices after U.S. crude inventories fell by about 3.3 million barrels in the week ended July 24, according to reports citing data from the American Petroleum Institute. Investors are now awaiting official inventory figures from the U.S. Energy Information Administration, due later on Wednesday.

Oil prices also found support amid reports that OPEC+ is considering a three-month pause in planned production increases from October, after completing the scheduled return of barrels previously cut on a voluntary basis.

The gains come after a steep three-day selloff that saw WTI crude tumble about 15 percent from Friday’s intraday high of nearly $93.50 a barrel, as traders unwound bullish positions on hopes that diplomatic efforts could help ease tensions between Washington and Tehran.