Oil prices rose to two-month highs overnight and are continuing to push higher.
Reports, from the BBC, among others, cited sources saying the US was preparing to partially evacuate its Iraqi embassy due to heightened security concerns in the region.
Surprised traders bought crude futures on reports the US was preparing to evacuate its embassy in Iraq, OPEC’s No. 2 crude producer after Saudi Arabia. A US official said military dependents could also leave Bahrain.
“The market wasn’t expecting this big geopolitical risk,” said Phil Flynn, analyst at Price Futures Group.
Earlier, Iran’s Minister of Defense Aziz Nasirzadeh said Tehran will strike US bases in the region if nuclear talks fail and conflict arises with Washington.
Donald Trump said he was less confident that Iran would agree to stop uranium enrichment in a nuclear deal with Washington, according to an interview released on Wednesday.
Ongoing tension with Iran means its oil supplies are likely to remain curtailed by sanctions.
Supplies will still increase, as OPEC+ plans to boost oil production by 411,000 barrels per day in July as it looks to unwind production cuts for a fourth straight month.
“Greater oil demand within OPEC+ economies — most notably Saudi Arabia — could offset additional supply from the group over the coming months and support oil prices,” said Capital Economics’ analyst Hamad Hussain in a note.
Also keeping prices elevated was news of a trade deal between the US and China, which could boost energy demand in the world’s two biggest economies.