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EMEA Oil Update: Crude Spikes as Middle East Tension Escalates

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Crude futures rose on Thursday after Iran's Revolutionary Guards reportedly said that they launched a retaliatory strike on a US airbase.

Front-month Murban crude futures surged 4.8% to $94.21 per barrel, while Brent futures rose 2.9% to $97.03/bbl.

The IRGC stated that this attack was a direct response to an early-morning American air assault on the outskirts of Bandar Abbas airport, Reuters reported.

This comes after US officials confirmed that American forces had executed pre-dawn, defensive strikes near the Strait of Hormuz.

The return to active hostilities wiped out Wednesday's market optimism over a resolution. Oil prices had plummeted 5% on hopes of advances towards an agreed peace framework after Iranian state TV revealed details of a draft framework.

The report said that the draft document contained a requirement for traffic through the vital Strait of Hormuz to be normalized within a month of agreement, but analysts said finalizing the deal itself could take about 60 days, if the sides even agree.

US President Donald Trump stated that he remained unsatisfied with the negotiations aimed at ending the three-month conflict, adding that critical issues have yet to be resolved.

"Traders have become increasingly cautious about holding long exposure to the oil market ahead of headlines showing progress in ending the conflict," ANZ said.

The ongoing disruption is severely altering global trade patterns, particularly for top buyers.

Analysts from the Oxford Institute for Energy Studies noted that China has sharply reduced its crude oil imports to 9.3 million barrels per day in April down from its five-year average of roughly 11 mb/d.

Meanwhile, underlying supply indicators suggest a tightening physical market.

Data from the American Petroleum Institute revealed that US crude oil inventories fell by 2.8 million barrels for the week ended May 22, building on a massive 9.1-million-barrels draw from the prior week.

Energy markets are now awaiting official confirmation from the US Energy Information Administration's upcoming petroleum inventory report.

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