Oil reversed earlier losses and quickly moved higher after it was reported that the U.S. and its allies believe major missile or drone strikes by Iran or its proxies against military and government targets in Israel are imminent.

West Texas Intermediate rallied as much as 1.4 per cent to trade above US$86 a barrel on Wednesday before paring some gains. Prices are up about 22 per cent in 2024, partly on geopolitical risks in the Middle East.

The news comes after Iran said it was preparing a response to a suspected Israeli attack on its consulate in Syria. Traders have been closely monitoring the situation, seeing the potential escalation as the next catalyst for crude.

 “Oil’s next move will now depend on the type of response from Iran” if the potential escalation will disrupt global oil supplies, said Giovanni Staunovo, an analyst at UBS Group AG.

Earlier, WTI traded little changed near $85 a barrel as a stronger U.S. dollar and increasing U.S. stockpiles added bearish headwinds to crude’s recent rally.  

Crude’s rise this year has also been underpinned by OPEC+ supply cuts. Investors will get a broader snapshot of the market outlook when OPEC and the International Energy Agency release monthly reports this week.

Prices:

• WTI for May delivery added 98 cents to settle at $86.21 a barrel in New York.
• Brent for June settlement gained $1.06 to settle at $90.48 a barrel.