New Delhi

Crude oil rose for a third day as traders reassessed supply risks in the Middle East, where Israel is seen as likely to make a retaliatory strike against Iran after Tehran's missile attack this week.

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Brent crude moved toward $75 a barrel after an almost 3 per cent gain in the previous two sessions. Meanwhile, West Texas Intermediate stagnated near $71. Israel threatened Iran with reprisals, although US President Joe Biden has called upon the country to hold off from targeting its nuclear sites.

The oil market remains captivated by the stalemate in the Middle East,  which comes after a year of unrest as Israel faces off against Iran and its proxies in Gaza, Lebanon, Yemen, and other areas. The region is responsible for about a third of global supply, and traders are worried that the latest escalation could disrupt flows if energy facilities come under attack or supply routes are obstructed.

Citigroup Inc. says a major strike by Israel on Iran's oil-exporting capacity may eliminate 1.5 million barrels of supply that is supplied into the market every day. According to analysts including Francesco Martoccia in a note, if the smaller infrastructure on target meant targeting these downstream assets and the storage facilities, output disruption would be between 300,000 and 450,000 barrels.

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The recent price increases have pushed a gauge of Brent's implied volatility to its highest level in nearly a year. Options markets have turned bullish too, with Brent skews now favouring calls - that benefit when prices rise - over the opposite puts as of Wednesday’s close.

Beyond the crisis, there are signs of adequate supply. OPEC+ intends to resume part of its shuttered capacity, with the additions set to begin in December, after a two-month delay. In the US, official statistics showed that crude inventories unexpectedly increased by 3.9 million barrels last week, the biggest leap in about five months.