Oil Prices Climb after US-Iran Tensions Escalate and Sharp Inventory Drop

Crude oil prices moved higher on Wednesday as fresh tensions in the Middle East worried global energy markets. West Texas Intermediate (WTI) crude oil futures climbed close to $64 per barrel, extending gains from the previous trading session, according to Trending Economics.

On February 4, 2026, crude oil was trading at $63.48 per barrel, up 0.42 per cent from the previous day. Over the past month, prices have risen by nearly 9 per cent, although oil remains more than 10 per cent lower compared to the same time last year.

Market sentiment was shaken after reports that the United States shot down an Iranian drone near a US aircraft carrier in the Arabian Sea. The incident added to fears of possible supply disruption in a region that plays a key role in global oil flows.

Tensions increased further after Iranian vessels reportedly challenged a US-flagged oil tanker, the Stena Imperative, while it was passing through the Strait of Hormuz. US Central Command said the tanker was harassed by Iran’s Islamic Revolutionary Guard Corps.

The Strait of Hormuz is one of the world’s most important oil routes, and any disruption there can quickly affect global prices.

Diplomacy still on the table

Despite the tensions, US President Donald Trump said diplomatic talks with Iran remain open. The White House confirmed that US-Iran discussions are still scheduled for Friday, easing some fears of immediate escalation.

Oil prices also gained support from fresh supply data. The American Petroleum Institute (API) reported that US crude oil inventories fell by 11.1 million barrels last week. If confirmed by official government data, this would be the largest weekly drop since June, signalling tighter supply in the market.

Meanwhile, OPEC+ expects global oil demand to gradually increase from March or April. The group is set to decide on March 1 whether to restart monthly oil production increases after pausing them during the first quarter of the year.

Traders are now watching Middle East developments, upcoming US-Iran talks, and official inventory data. Any change in these areas could strongly influence oil prices in the days ahead.