Crude oil futures surged on Thursday, bouncing back from earlier losses, as tensions in the Middle East escalated.

West Texas Intermediate crude for May delivery rose by $1.16 to settle at $86.59 per barrel, while Brent for June delivery climbed $1.30 to $90.65 per barrel, marking their highest settlement prices since October 20.

Reports of heightened tensions between Israel and Iran, with Israeli embassies on high alert and the cancellation of home leave for combat troops, contributed to the rise in oil prices.

Additionally, President Biden warned Israeli Prime Minister Benjamin Netanyahu about strikes on aid workers in Gaza, stressing the importance of addressing humanitarian concerns.

The increase in oil prices this year, with U.S. crude up by nearly 21% and Brent up by 18%, has been fueled by geopolitical tensions in the Middle East and Eastern Europe, along with a tightening global crude market, CNBC reported.

While tensions between Iran and Israel have raised fears of oil supply disruptions, John Kilduff of Again Capital highlights that Ukrainian drone strikes on Russian oil infrastructure have had a significant impact on prices, potentially leading to a decrease in Russian oil supply.

Despite calls from the Biden administration to cease operations, Ukraine continues its strikes, suggesting a potential reduction in Russian oil output.

Written by B.C. Begley