Oil prices climbed to their highest levels since late September on Wednesday, supported by rising concerns over Iran, a surprise draw in U.S. crude inventories and a weaker U.S. dollar. Brent crude futures settled up 83 cents, or 1.2%, at $68.40 a barrel, while U.S. West Texas Intermediate rose 82 cents, or 1.3%, to $63.21.
Tensions surrounding Iran remained front and center after U.S. President Donald Trump urged Tehran to negotiate over its nuclear program, warning that any future U.S. military action would be more severe. Iranian officials responded that the country would retaliate forcefully if attacked. Adding to market unease, a U.S. aircraft carrier and supporting warships arrived in the Middle East earlier this week, reinforcing concerns about potential supply disruptions.
Some of the geopolitical premium was capped by renewed optimism around diplomacy, with trilateral talks between Russia, Ukraine and the U.S. scheduled to resume in Abu Dhabi on February 1. Still, analysts said Middle East risks continue to underpin prices.
Oil also found support from a larger-than-expected draw in U.S. crude inventories. The Energy Information Administration reported that crude stockpiles fell by 2.3 million barrels last week to 423.8 million barrels, defying expectations for a build. Strong crude exports and lower imports contributed to the draw, while gasoline and distillate inventories posted modest increases.
The impact of last weekend’s winter storm in the U.S. remained visible. Producers were gradually restoring output, but domestic crude production was still estimated to be down about 600,000 barrels per day, or roughly 4% of total output, as energy infrastructure continued to recover from freezing conditions.
A weaker U.S. dollar added further support, hovering near four-year lows against a basket of major currencies, making oil more attractive for buyers using other currencies. Meanwhile, the Federal Reserve held interest rates steady, citing persistent inflation and solid economic growth, offering little clarity on when borrowing costs might begin to fall.
Additional support came from Kazakhstan, where ongoing production losses at the Tengiz oilfield have tightened supply. While authorities hope output will resume gradually within a week, industry sources caution the recovery could take longer, keeping the market sensitive to further disruptions.