Oil climbed in Asian trade on Wednesday, trading just below highs not seen in seven months earlier this week as mounting geopolitical risk around the U.S.-Iran relationship countered bearish inventory news and fresh tariff-related jitters.
As of 22:41 ET (03:41 GMT), Brent futures for April delivery were up 1% at $71.49 per barrel, while West Texas Intermediate (WTI) crude gained 1.3% to $66.46 per barrel. Both contracts had fallen about 1% on Tuesday amid renewed concerns over U.S. trade policy.
Geopolitical tensions underpin markets ahead of Geneva meetings
Market participants said rising risk premiums tied to the Middle East underpinned prices. U.S. envoys, including special representative Steve Witkoff and presidential adviser Jared Kushner, are scheduled to meet Iranian counterparts in Geneva on Thursday as parties pursue a possible nuclear deal.
Iran's foreign minister has indicated that a diplomatic agreement could be reached if negotiators prioritise talks, offering Tehran flexibility on sensitive issues in exchange for sanctions relief. At the same time, U.S. President Donald Trump warned there would be "very bad consequences" if a deal is not reached, highlighting the potential for negotiations to deteriorate into conflict.
ING analysts noted that the United States continues to build up military assets in the region. "So, without a deal, the probability of military action is high and growing," they said. The analysts added that "President Trump’s 10-to-15-day deadline for Iran works out to a date sometime in very early March. This uncertainty means the market will continue to price in a large risk premium and remain sensitive to any fresh developments."
Large U.S. crude build tempers the upside
On the supply side, the American Petroleum Institute reported a far larger-than-expected increase in U.S. crude inventories for the week ended February 20. The API said U.S. crude stocks rose by 11.4 million barrels, substantially above market expectations for about a 1.9 million-barrel rise.
Product inventories showed a different trend, with gasoline and distillate stocks declining, according to the API figures. Traders were awaiting the U.S. Energy Information Administration's official data later in the day to confirm the API's preliminary numbers.
Trade policy uncertainty adds another layer of volatility
Global market sentiment was also affected by renewed uncertainty over U.S. trade policy. President Trump’s 10% global import tariff took effect on Tuesday, with plans under consideration to raise the rate to 15%.
The tariff action followed a U.S. Supreme Court decision that struck down an earlier tariff programme, prompting the administration to reimpose duties under alternative authority. The tariff move contributed to market nerviness and helped explain Tuesday's drop in oil contracts.
With geopolitical risk premiums elevated, a surprise inventory swing and policy-driven market uncertainty, traders remained on edge. The market will likely continue to respond sensitively to developments in Geneva, any official EIA inventory confirmation, and further changes in U.S. trade measures.