EMEA crude futures settled higher in after-hours trading on Thursday as a widening Middle East conflict and attacks on oil tankers heightened fears of further disruptions to regional supplies.
Brent crude futures rallied 5.4% to $106.69 per barrel, while Dubai 1st Line Futures rose 0.54% to $113.00/bbl.
Soojin Kim, a research analyst at MUFG, said prices were supported by renewed fighting in the Middle East and Iran's warning that it is prepared to intensify attacks if US strikes continue, raising the risk of further disruption through the Strait of Hormuz.
Yemen's Houthis reportedly seized control of the port city of Mocha on Thursday and advanced down the Red Sea coast to strategic islands, posing further threat to Red Sea traffic, as traffic via the Hormuz remains restricted as tanker attacks in the region have intensified.
The developments come days after the militant group targeted energy facilities in Saudi Arabia. On Tuesday, Saudi Arabia's Foreign Affairs Ministry said Yemen's Houthis targeted civilian and economic assets in the cities of Abha, Khamis Mushait, Jazan and Najran.
On Wednesday, President Trump said that the US may hit Iran's Pickaxe Mountain, located near its heavily damaged Natanz uranium enrichment facility, warning that the Iranian conflict would likely last beyond the November midterm elections.
Fueling bullish sentiment, the US military destroyed five Iranian crude oil tankers in retaliation for Tehran's attempted attacks on an American warship.
Iran, in response, targeted two US warships and eight oil tankers in the Persian Gulf, marking the biggest wave of tit-for-tat attacks on vessels in the strategic waterway by both sides since the onset of the Middle East conflict in February.
Iran's Islamic Revolution Guards Corps said that Tehran will respond to any attack with a far greater number of strikes, noting that if the US hits two or three Iranian targets, its navy would respond by hitting 20 targets.
"The risk is that escalation starts leading to meaningful disruptions to Strait of Hormuz flows," ING strategists said in a note Thursday, noting that the market could tighten more sharply if ongoing escalation translates into disrupted oil flows.
On the demand side, China has stepped up purchases in recent weeks after months of subdued demand, boosting physical crude markets.
ING analysts said that while imports remain well below year-ago levels, they've started to recover from the lows seen in June; recent physical-market activity suggests this could continue.
On the supply front, US commercial crude oil inventories decreased by 400,000 barrels to 424.1 mmbbls in the week ended Sept. 4, the Energy Information Administration said in its weekly report released Thursday.
Crude inventories matched the five-year average for this time of year, the EIA said. The draw is significantly below Investing.com's estimate of 1.4 million barrels for the week ended Sept. 4.