Global oil prices climbed sharply on Wednesday following a report suggesting Israel may be preparing a military strike on Iran’s nuclear infrastructure, intensifying concerns of a wider Middle East conflict.
CNN cited multiple US officials who confirmed intelligence indicating that Israel was planning a direct attack on Iranian atomic sites. The news pushed both major crude benchmarks up more than one percent, adding to fears that the long-standing regional tension could escalate into full-scale warfare.
The report comes at a time of heightened sensitivity in the region, with Israel already conducting intensified military bombardments in Gaza. Analysts warned that any Israeli military action targeting Iran’s nuclear programme could send shockwaves through global energy markets and risk destabilising the region further.
“This is the clearest sign yet of how high the stakes are in the US-Iran nuclear talks and the lengths Israel may go to if Iran insists on maintaining its commercial nuclear capabilities,” said Robert Rennie of Westpac Banking Corp. He noted that crude prices would continue to carry a risk premium while diplomatic negotiations falter.
Adding to the uncertainty, US President Donald Trump last week said a deal on Iran’s nuclear programme could be imminent, only to follow it with a stark warning urging Tehran to “move quickly or something bad is going to happen.” However, Iran’s Supreme Leader Ayatollah Ali Khamenei struck a pessimistic tone on Tuesday, saying the latest rounds of US-mediated nuclear talks were unlikely to produce results.
Oil prices have already risen by approximately 15 percent this month, buoyed by diminishing fears over the global economic outlook and relative easing in trade tensions between China and the US. However, geopolitical risk remains a key driver of market volatility.
Safe-haven assets like gold also gained, with prices rising nearly two percent. Yet the tensions appeared to have a limited immediate impact on most Asian equities, which extended recent gains amid optimism over trade discussions between Washington and Beijing.
Still, the fragile US-China truce was tested as Beijing lashed out at Washington’s latest restrictions on high-tech chip exports, accusing the US of “bullying” and vowing retaliatory measures. The renewed tech dispute could complicate recent progress that saw both countries agree to temporarily ease tariff burdens.
Meanwhile, US Federal Reserve officials tempered expectations of interest rate cuts, citing concerns about the inflationary and economic impact of Trump’s tariff plans. St. Louis Fed President Alberto Musalem warned that protectionist measures could drag on economic growth and labour markets. Atlanta Fed President Raphael Bostic echoed the caution, suggesting further economic uncertainty might necessitate higher-for-longer interest rates.
Markets in Europe reacted more cautiously. London’s FTSE dipped following a stronger-than-expected UK inflation report for April, while Paris and Frankfurt also saw losses. The pound rallied against the dollar on inflation concerns, while the US dollar slipped against the euro and yen ahead of a G7 finance ministers meeting this week.
