Oil prices rose in Asian trading on Wednesday, up 4% from the previous session on concerns that the Iranian-Israeli conflict could disrupt supplies, UNN reports citing Reuters.
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Brent crude futures rose 26 cents, or 0.3%, to $76.71 a barrel at 04:40 GMT (07:40 Kyiv time). WTI crude futures rose 35 cents, or 0.5%, to $75.19 a barrel.
US President Donald Trump on Tuesday called on Iran to "unconditionally surrender" as the Iranian-Israeli air war enters its sixth day.
On Tuesday, three officials said the US military is sending more fighter jets to the region to strengthen its forces.
Analysts say the market is mostly concerned about supply disruptions in the Strait of Hormuz, through which a fifth of the world's seaborne oil passes.
Iran is the third largest OPEC producer, producing about 3.3 million barrels of oil per day, but spare capacity among OPEC+ producers can easily cover this.
"A significant disruption to Iran's production or export infrastructure would increase upward pressure on prices. However, even in the unlikely event of a loss of all Iranian exports, they could be replaced by spare capacity from OPEC+ producers... about 5.7 million barrels per day," Fitch analysts said in a client note.
Brent crude prices have risen by about $10 a barrel in the past two weeks, and Fitch analysts said they expect the geopolitical risk premium in oil prices to remain around $5-10.
Another sign of market anxiety was that the premium for Brent crude to Middle Eastern Dubai crude soared above $3 a barrel on Wednesday, according to market sources, reaching its highest level since late September 2023, according to LSEG data.
Markets are also looking forward to the second day of discussions by the US Federal Reserve on Wednesday, during which the central bank is expected to leave its benchmark overnight interest rate in the 4.25% - 4.50% range.
However, the conflict in the Middle East and the risk of a slowdown in global growth may push the Fed to potentially cut rates by 25 basis points in July, earlier than current market expectations in September, said Tony Sycamore, an IG market analyst.
"The situation in the Middle East could be a catalyst for the Fed to become more dovish, as it was after the Hamas attack on October 7, 2023," Sycamore said.
Lower interest rates generally stimulate economic growth and oil demand.
However, the Fed's decision is complicated by the fact that the conflict in the Middle East is creating a new source of inflation by sharply increasing oil prices.