Oil prices increased in early Asian trading on Thursday, continuing significant gains from the previous session after the assassination of a Hamas leader in Iran heightened the risk of a broader Middle East conflict and amid signs of strong oil demand in the U.S.

 

Global benchmark Brent crude futures increased by 67 cents, or 0.8%, to $81.51 per barrel by 0007 GMT, while U.S. West Texas Intermediate crude futures increased by 69 cents, or 0.9%, to $78.60 per barrel.

 

The most active contracts on both benchmarks surged about 4% in the previous session.

 

Hamas leader Ismail Haniyeh was assassinated in the Iranian capital Tehran on Wednesday, less than 24 hours after Hezbollah's most senior military commander, based in Lebanon, was killed in an Israeli strike in Beirut.

 

The assassinations heightened concerns that the 10-month-old conflict in Gaza between Israel and Hamas could escalate into a wider Middle East war, potentially disrupting oil supplies from the region.

 

"We fear the region is on the brink of an all-out war," Japan's deputy United Nations representative Shino Mitsuko said on Wednesday as the U.N. Security Council called for increased diplomatic efforts.

 

Also contributing to the rise in oil prices was a series of data releases from the U.S., the world's largest oil consumer, and a weaker dollar.

 

Strong export demand reduced U.S. crude oil stockpiles by 3.4 million barrels in the week ending July 26 to 433 million barrels, according to data from the U.S. Energy Information Administration on Wednesday.

 

U.S. oil inventories have declined for five consecutive weeks, the longest decline since January 2021.

 

U.S. oil demand reached a seasonal record in May as gasoline consumption soared to its highest level since pre-pandemic levels, separate EIA data released on Wednesday showed.

 

Meanwhile, the U.S. dollar index extended its losses on Thursday from the previous session after the Federal Reserve held interest rates steady but indicated the possibility of a rate cut in September. A weaker dollar can increase oil demand from investors holding other currencies.