Oil futures continued their upward trajectory on Thursday as escalating tensions in the Middle East raised concerns about potential disruptions to regional crude supplies.
Risks of a larger conflict could continue to push prices to the upside. The uncertainty around the next developments could leave markets cautious.
Any damage to energy infrastructure in the region could lead to more dramatic price spikes, further contributing to the bullish outlook after weeks of declines on demand concerns.
However, the global supply and demand outlook could keep the bullish pressures in check to a certain extent. U.S. crude inventories rose while expectations pointed to a decline, showing some uncertainty regarding the demand in the US market. At the same time, OPEC has enough spare capacity to cover potential production losses from Iran if needed.
A stronger supply situation could reassure market participants and help balance the impact of geopolitical risks to a certain extent. As a result, crude prices could remain volatile as traders react to new developments.
