International Oil Prices Surge Nearly 8% on Mideast Tensions and Low U.S. Inventories

International oil prices soared by nearly 8% on Wednesday, driven by renewed concerns over crude oil supply disruptions stemming from escalating tensions in the Middle East. Airstrikes conducted by the U.S. and Saudi Arabia against Iran-backed armed groups in Iraq, coupled with Iran's actions targeting vessels and a U.S. base, intensified market worries.

Brent crude futures climbed $6.65, or 7.91%, to settle at $90.74 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $5.20, or 6.56%, to $84.46 a barrel. The U.S. military reported thwarting an Iranian attack on its forces in the Middle East, while Iran stated it had fired on vessels in the Strait of Hormuz and a U.S. base in Jordan.

Adding to the upward pressure, U.S. crude inventories fell significantly, decreasing by 7.2 million barrels to 404.5 million barrels in the past week, reaching their lowest level since 2018. This drop, far exceeding analysts' expectations of a 1.3 million barrel decrease, was attributed to robust energy exports and strong domestic demand. Furthermore, OPEC+ is reportedly expected to pause production increases from October for three months after completing its current expansion plan, providing additional support to oil prices.

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The market is rapidly pricing in the renewed supply risk in the region.