Investing.com-- Oil prices rose sharply in Asian trade on Wednesday after reports said that Hamas leader Ismail Haniyeh was killed in by an Israeli strike in Iran's capital, potentially heralding a spike in Middle East tensions.
Prices rose from nearly two-month lows as industry data showed U.S. inventories marking a fifth straight week of strong draws- indicating tight market conditions in the world’s biggest fuel consumer.
Brent oil futures expiring in September jumped 1% to $79.45 a barrel, while West Texas Intermediate crude futures rose 1.2% to $75.64 a barrel by 23:05 ET (03:05 GMT).
Hamas chief reportedly killed in Israeli strike
Multiple media reports said that Ismail Haniyeh, the leader of Palestinian military group Hamas, was killed in an Israeli strike in Tehran.
The move presents a potential escalation in the Israel-Hamas war, which stretched into a ninth month in July. It could also result in a resurgence in tensions between Iran and Israel, after a series of missile strikes between the two earlier this year.
Haniyeh's reported death furthered fears of an all-out war in the Middle East, especially after Israel carried out strikes against Lebanon-based, Iran-backed armed group Hezbollah on Tuesday.
The strikes were in retaliation for a rocket strike on Israel-occupied Golan Heights over the weekend. Israel claimed that it had killed a major Hezbollah commander in Tuesday’s attack.
Traders were seen attaching a greater risk premium to crude on concerns that a bigger Middle East conflict will disrupt oil supplies from the oil-rich region.
U.S. and UN efforts to broker a ceasefire between Israel and Hamas- which is at the heart of the conflict- have so far yielded few results.
US inventories shrink for fifth straight week- API
Data from the American Petroleum Institute showed on Tuesday that U.S. inventories saw a draw of nearly 4.5 million barrels in the week to July 26. The reading marked a fifth straight week of draws in U.S. inventories, as fuel demand remained underpinned by the travel-heavy summer season.
But part of the outsized draws were also driven by supply disruptions due to a recent hurricane in the Gulf of Mexico.
Still, the API data heralds a similar trend from official inventory data, which is due later in the day.
OPEC, Fed meetings on tap
But despite Wednesday's gains, oil’s recovery remained fragile amid persistent concerns over slowing demand in top oil importer China. Soft purchasing managers index readings from the country added to this concern.
Caution before a Federal Reserve interest rate decision and a meeting of the Organization of Petroleum Exporting Countries also kept markets on edge.
The Joint Ministerial Monitoring Committee of the OPEC is set to meet on Thursday. Media reports say the meeting is unlikely to result in any major changes to production, despite recent weakness in oil prices.
Still, top producers Russia and Saudi Arabia are likely to further downplay any plans to begin scaling back their production cuts this year- which could offer oil with some support.