Oil prices rose after surging to their highest in nearly five months on Tuesday, as President Donald Trump stoked speculation that the U.S. might join an attack on Iran, raising concerns about a disruption to Middle East supplies.

West Texas Intermediate crude rose as much as 1.1% to trade above $75 a barrel earlier. Brent crude settled near $76 in the previous session. Trump met with his national security team on Tuesday, demanding Iran's "UNCONDITIONAL SURRENDER" and warning of a possible attack on the OPEC producer leader ahead of the meeting in a social media post.

So far, Iran's crude export infrastructure has been spared, and the impact has been largely limited to shipping. The Middle East produces about a third of the world's oil, and a broader conflict could push prices even higher.

The hostilities have roiled global markets, with investors seeking shelter in assets such as gold and oil volatility surging to a three-year high. There has been a surge in hedging by crude producers, and the volume of futures and options contracts changing hands has surged.

Israel launched a surprise attack on Iran's nuclear sites late last week, but American weapons are seen as essential to achieving a more complete destruction of Tehran's atomic program than anything Israel could do on its own.

Israel has sought to draw the U.S. — which has provided defensive support against Iranian missile fire — deeper into the conflict. Prime Minister Benjamin Netanyahu told ABC News on Monday that the countries share a common enemy in Iran, and that it was in America's interest to support Israel. Iran has prepared missiles and other military equipment to strike U.S. bases in the Middle East if the United States joins Israel in a war against it, the New York Times reported, citing unnamed U.S. officials who have reviewed intelligence reports.

The biggest concern for oil markets centers on the Strait of Hormuz. So far, there is no sign that Tehran is trying to disrupt the flow of crude through the narrow waterway, which carries about a fifth of the world's daily output. Saudi Arabia and Iraq export oil through the strait.

Meanwhile, U.S. industry figures show the country's crude inventories fell by more than 10 million barrels last week. It would be the biggest drop since last summer if confirmed by official data later Wednesday. (alg)

Source: Bloomberg