Oil prices rose by more than 1% on Wednesday after reports emerged that Israel is preparing for a potential strike on Iranian nuclear facilities. The news has sparked concerns over possible disruptions to oil supply from the Middle East, a region central to global energy markets.

Brent crude futures for July delivery rose by 86 cents, or 1.32%, to $66.24 a barrel by 0003 GMT. US West Texas Intermediate (WTI) crude futures for July increased by 90 cents, or 1.45%, to $62.93.

The jump followed a report by CNN on Tuesday, citing multiple US officials, which said that newly obtained intelligence suggests Israel is making preparations to attack Iranian nuclear sites. According to the officials, it remains unclear whether Israel's leadership has made a final decision to launch such a strike. The report noted that within the US government, there is internal disagreement about whether the attack will ultimately take place.

The prospect of a strike sent US crude futures up by more than $2 a barrel at one point, while Brent gained over $1.
An Israeli assault on Iran—OPEC’s third-largest oil producer—could severely affect crude flows from the country. Analysts warn that in retaliation, Iran may move to block the Strait of Hormuz, a strategic chokepoint through which a significant portion of the region's oil—including from Saudi Arabia, Kuwait, Iraq and the UAE—is exported.

Despite the geopolitical tensions, there were also developments indicating a potential uptick in oil supply. According to market sources citing American Petroleum Institute (API) data, US crude oil inventories rose by 2.5 million barrels in the week ending May 16, although gasoline and distillate stockpiles fell. The US Energy Information Administration is expected to release official data later on Wednesday.

In another development, Kazakhstan's oil output has reportedly increased by 2% so far in May, according to an industry source. This comes despite pressure from the OPEC+ alliance, which has urged the Central Asian nation to cut back production.

Intelligence reports
The CNN report said that the new intelligence on Israel's potential military action is based on both public and private communications from senior Israeli officials, as well as intercepted messages and observed troop movements. Two sources cited by CNN said that military preparations observed by the US included the movement of air munitions and the conclusion of an air exercise.

One official familiar with the intelligence told CNN that the probability of a strike had “gone up significantly in recent months,” especially if the US were to reach a nuclear agreement with Iran that fails to eliminate all of Tehran’s enriched uranium.

In a related development, Iran’s Supreme Leader Ayatollah Ali Khamenei on Tuesday dismissed US demands that Tehran cease uranium enrichment as “excessive and outrageous.” His comments, reported by state media, cast further doubt on the prospects of a new nuclear deal being reached.

Reuters could not independently verify the CNN report. The White House National Security Council, the Israeli Embassy in Washington, and the Israeli Prime Minister’s Office declined to comment when contacted.