Oil prices rose on Thursday as the US and Iran attempted to ease a standoff in talks over Tehran's nuclear program while both sides heightened military activity in the key oil-producing region.
Brent futures climbed 23 cents, or 0.3% to $70.58 a barrel by 0735 GMT, while US West Texas Intermediate (WTI) crude gained 25 cents, or 0.4%, to trade at $65.44 a barrel.
Both benchmarks settled more than 4% higher on Wednesday, posting their highest settlements since January 30, as traders priced in the risk of supply disruptions in the event of a conflict.
"Oil prices are rallying as the market becomes increasingly concerned over the potential for imminent US action against Iran," said ING analysts in a Thursday note.
Iranian state media reported the country had shut down the Strait of Hormuz for a few hours on Tuesday, without making clear whether the waterway had fully reopened. About 20% of the world's oil supply passes through the waterway.
"Tensions between Washington and Tehran remain high, but the prevailing view is that full-scale armed conflict is unlikely, prompting a wait-and-see approach," said Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment, a unit of Nissan Securities.
"US President Donald Trump does not want a sharp rise in crude prices, and even if military action occurs, it would likely be limited to short-term air strikes," Kikukawa added.
A degree of progress was made during Iran talks in Geneva this week but distance remained on some issues, the White House said on Wednesday, adding that it expected Tehran to come back with more details in a couple of weeks.
Iran issued a notice to airmen (NOTAM) that it plans rocket launches in areas across its south on Thursday from 0330 GMT to 1330 GMT, according to the US Federal Aviation Administration website.
At the same time, the US has deployed warships near Iran, with US Vice President JD Vance saying Washington was weighing whether to continue diplomatic engagement with Tehran or pursue "another option".
Meanwhile, two days of peace talks in Geneva between Ukraine and Russia ended on Wednesday without a breakthrough, with Ukrainian President Volodymyr Zelenskiy accusing Moscow of stalling US-mediated efforts to end the four-year-old war.
US crude and gasoline and distillate inventories fell last week, market sources said, citing American Petroleum Institute figures on Wednesday, contrary to expectations in a Reuters poll that crude stocks would rise by 2.1 million barrels in the week to February 13.
Official US oil inventory reports from the Energy Information Administration are due on Thursday.
