Oil prices are hovering around their highest level in seven months ahead of US-Iran talks

Oil prices hovered around a seven-month high on Wednesday as the threat of a military conflict between the US and Iran that could disrupt supply continues to worry investors even as talks between the sides are scheduled for Thursday. Brent futures were trading at $71.22 a barrel, up 45 cents, or ⁠0.64%, ⁠at 0140 GMT. WTI futures rose 0.64%, or 42 cents, to $66.05.

Brent prices hit their highest since July 31 on Friday, while WTI hit their highest level since August 4 on Monday. Both contracts remained close as the U.S. has positioned forces in the Middle East to force Iran to negotiate an end to its nuclear and ballistic missile programs.A prolonged conflict could disrupt supplies from Iran, the third-largest producer of crude oil in the Organization of the Petroleum Exporting Countries, and other countries in the Middle East’s main producing region.

US envoys Steve Witkoff and Jared Kushner will meet with an Iranian delegation in Geneva on Thursday for a third round of talks. Iranian Foreign Minister Abbas Araqchi said on Tuesday that a deal with the US “is within reach, but only if diplomacy is prioritized”.

“(US) President (Donald) Trump has warned that without a deal there will be ‘very bad consequences’. Whether (Iran’s) concessions will meet the US’s red line of ‘zero enrichment’ remains to be seen,” IG market analyst Tony Sycamore said in a note. Amid the heightened tensions, Iran and China have accelerated talks to buy Chinese anti-ship cruise missiles, which could target US naval forces massed near Iran’s coast, according to Reuters sources.

Anti-ship cruise missiles would increase Iran’s attack capabilities and threaten US naval forces, experts say. Trump will deliver the traditional State of the Union address to Congress on Tuesday evening. Two White House officials, speaking on condition of anonymity, said Trump will discuss his plans for Iran but did not provide details. While geopolitical tensions have supported prices, the market is also grappling with concerns about large inventory increases as global supply exceeds demand.

Late Tuesday, the American Petroleum Institute reported a huge increase in U.S. oil inventories of 11.43 million barrels in the week ended Feb. 20, according to market sources.

However, gasoline and distillate stocks fell, the sources said, citing API data.

Official U.S. oil inventory reports from the Energy Information Administration will be released later Wednesday. ,