Crude oil futures rose 1% on Wednesday as the U.S. is reportedly bracing for an “imminent” strike by Iran or its proxies against Israel.
The West Texas Intermediate contract for May delivery rose 86 cents, or 1.01%, to $86.09 a barrel. June Brent futures gained 90 cents, or 1.01%, $90.32 a barrel.
The U.S. and its allies see a major missile or drone strike by Iran or its proxies against Israel as imminent, people familiar with the intelligence told Bloomberg News. The possible attack could happen in the coming days, the people told Bloomberg.
Tensions in the Middle East are red hot with Israel warning OPEC member Iran Wednesday it would attack the Islamic Republic if Tehran strikes Israel.
“If Iran attacks from its territory, Israel will react and attack Iran,” Israeli Foreign Minister Israel Katz said on the social media platform X, tagging Supreme Leader Ayatollah Ali Khamenei.
Khamenei has threatened to punish Israel after Iran’s consulate in Damascus, Syria, was destroyed in a missile attack last week, killing seven Iranian military officials. Israel has not claimed responsibility for the strike, but the U.S. has assessed that Israel is responsible.
“Consulates and embassies of any country are regarded as the soil of that country. When they attack our consulate, it means that they have attacked our soil,” Khamenei said Wednesday in a speech in Tehran after leading prayers for the Eid al-Fitr holiday.
Oil prices haven fallen more than 1% this week as investors booked profits after last week’s rally. U.S. crude and the global benchmark have gained nearly 20% and 17%, respectively, this year as geopolitical tensions mount against the backdrop of a tightening global crude market.
Oil prices had fallen earlier Wednesday after a major U.S. crude stockpile build and a hotter-than-expected inflation report.
U.S. commercial crude stockpiles, which excludes the strategic petroleum reserve, rose by 5.8 million barrels last week, according to the Energy Information Administration. Fuel products supplied to the market, a proxy for demand, fell by more than 2 million barrels per day during the same period.
The consumer price index rose 0.4% for March and 3.5% over the previous year, compared with expected gains of 0.3% and 3.4%, respectively.
The market was originally expecting the Federal Reserve to start cutting rates, but traders in the fed funds futures market are now expecting the first cut to come in September, according to CME Group calculations. Lower interest rates typically boost economic growth, which can lead to higher crude demand.
