Oil Prices Surge on Israel-Iran Strike Fears and U.S. Crude Stock Build

Oil prices rose 1.5% in Asian trading on Wednesday, driven by escalating geopolitical tensions and surprising U.S. inventory data. Brent crude futures for July climbed to $66.42 per barrel, while West Texas Intermediate (WTI) rose to $62.92.

The spike followed a CNN report citing U.S. intelligence that Israel is preparing for a potential military strike on Iranian nuclear facilities. Although Israeli leadership has not finalized a decision, officials say the probability of such action has “significantly increased” in recent months. The potential conflict, unfolding as the U.S. continues nuclear negotiations with Tehran, raises fears of major supply disruptions across the Middle East.

According to ING analysts, “The report signals heightened geopolitical risk, with potential threats not only to Iranian supply but broader regional output.”

The report also highlighted Iran’s refusal to negotiate on its uranium enrichment program, a key sticking point in U.S.-Iran talks. This intransigence, combined with legacy tensions from the Trump-era nuclear deal, has added fuel to concerns that diplomacy may fail.

Adding further pressure to oil prices, the American Petroleum Institute (API) reported an unexpected 2.5 million-barrel increase in U.S. crude inventories for the week ending May 16, compared to expectations of a 1.9 million-barrel draw. Gasoline inventories fell by 3.2 million barrels, while distillates, including diesel and heating oil, declined by 1.4 million barrels.

ING noted that inventory data suggests a tightening market for middle distillates. Traders now await official data from the U.S. Energy Information Administration (EIA) for confirmation.

With heightened geopolitical tensions and surprising inventory trends, energy markets remain on edge, pricing in a growing risk premium.