Oil prices jumped Wednesday after a media report indicated that Israel is preparing for a potential military strike on Iranian nuclear facilities, spurring supply disruption concerns.

At 07:35 ET (11:35 GMT), Brent Oil Futures jumped 0.7% to $65.82 per barrel, while West Texas Intermediate (WTI) crude futures also climbed 0.8% to $62.52 per barrel.

Potential Israeli strike on Iran - CNN

Israel is preparing for a potential military strike on Iranian nuclear facilities, as the U.S. continues to pursue a diplomatic agreement with Tehran, CNN reported on Tuesday, citing multiple U.S. officials familiar with recent intelligence.

The report said that the Israeli leaders have not made a final decision yet, but the likelihood of an Israeli strike has "gone up significantly" in recent months.

"The news, based on US intelligence, may signal a significant escalation, prompting the oil market to price in a larger geopolitical risk premium for the region," ING analysts said in a note.

"Such an escalation would not only put Iranian supply at risk, but also in large parts of the broader region," they added.

This comes amid ongoing U.S.-Iran nuclear talks, where Iran has reaffirmed that its uranium enrichment program is "absolutely non-negotiable". The U.S. has demanded that Iran halt all uranium enrichment activities, citing concerns over potential nuclear weaponization.

The CNN report added that a U.S.-Iran nuclear deal under President Donald Trump that doesn't eliminate all Iranian uranium makes a strike more likely.

U.S. crude inventories rise unexpectedly - API

Market participants also digested a weekly industry report showing an unexpected increase in U.S. crude stockpiles.

The American Petroleum Institute on Tuesday reported an unexpected increase in weekly domestic crude stockpiles.

U.S. crude stockpiles increased by approximately 2.5 million barrels for the week ending May 16, defying forecasts for a 1.9 million-barrel draw and following a 4.3 million-barrel build reported by the API the week before.

Gasoline inventories dropped by roughly 3.2 million barrels, while distillate stocks, which include diesel and heating oil, declined by 1.4 million barrels.

"Inventory data continues to suggest a tightening middle distillate market," ING analysts said.

Investors now await the official data from the U.S. Energy Information Administration (EIA), scheduled for release later in the day, to confirm these trends.

Source: Investing.com