Oil Prices Edge Higher as U.S.–Iran Tensions Fuel Supply Concerns Despite Inventory Build

Oil prices inched higher on Thursday, supported by rising geopolitical risks in the Middle East, as investors weighed the possibility that escalating tensions between the United States and Iran could disrupt global crude supplies.

Brent crude futures rose 35 cents, or 0.5%, to $69.75 a barrel by 08:53 GMT, while U.S. West Texas Intermediate (WTI) crude gained 37 cents, or 0.57%, to $65 a barrel. Both benchmarks had already advanced on Wednesday, with Brent up about 0.9% and WTI nearly 1%, as geopolitical concerns outweighed bearish inventory data.

Market sentiment has been underpinned by fears that any military escalation involving Iran could threaten shipping through the Strait of Hormuz, a critical chokepoint through which roughly 20 million barrels per day—about one-fifth of global oil consumption—passes.

“The risk of disruption to flows through the Strait of Hormuz is providing support to prices, even in the face of rising U.S. inventories,” said PVM analyst John Evans, adding that a weaker U.S. dollar also helped underpin crude prices.

Geopolitical uncertainty intensified after U.S. President Donald Trump said following talks with Israeli Prime Minister Benjamin Netanyahu that no definitive agreement had yet been reached on how to proceed with Iran, although negotiations with Tehran would continue. Trump had earlier indicated he was considering deploying a second U.S. aircraft carrier to the Middle East if talks fail, further raising the stakes. Details on the timing and location of the next round of negotiations remain unclear.

Adding a counterweight to prices, the International Energy Agency on Thursday trimmed its forecast for global oil demand growth in 2026, citing the dampening effect of higher prices on consumption.

Meanwhile, U.S. supply data pointed to a looser near-term balance. The Energy Information Administration reported that U.S. crude inventories rose by 8.5 million barrels last week to 428.8 million barrels—far above analysts’ expectations for a modest 793,000-barrel increase. Refinery utilization rates also declined, falling by 1.1 percentage points to 89.4%, suggesting weaker demand from refiners.

Overall, oil markets remain caught between elevated geopolitical risks that threaten supply and fundamental pressures from rising inventories and softer demand expectations, keeping prices supported but capping further upside for now.