Oil continued to rise on Wednesday over worries that the escalating conflict in the Middle East could threaten oil supplies.

Brent futures rose 34 cents, or 0.46%  to settle at $73.90 per barrel while the US West Texas Intermediate (WTI) crude climbed 27 cents, or 0.39%, to settle at $70.10 per barrel.

Meanwhile, Israel and its ally, the US vowed payback for the attack, a sign that conflict in the region is intensifying after Iran fired more than 180 missiles at Israel, its biggest-ever direct attack on the country on Tuesday.

Since the late Tuesday bombing, Israeli ground troops have fought with Hezbollah in southern Lebanon, with Israeli Prime Minister Benjamin Netanyahu vowing vengeance and raising fears of a full-fledged conflict.

According to rumors, Israel’s reaction might include hitting Iranian oil production facilities and other critical targets.

On Wednesday, Iran said that its missile attack on Israel was stopped, barring further provocation.

It claimed that any Israeli retaliation to its attack would result in widespread destruction as Iran accounts for around 4% of world oil output.

Analysts say that an attack on Iran’s oil infrastructure could provoke it to respond with a strike on Saudi oil facilities, similar to one conducted in 2019 on crude processing facilities there.

Meanwhile, a meeting on Wednesday of the top ministers of the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ kept oil output policy unchanged.

The group is set to raise output by 180,000 barrels per day each month from December.

Meanwhile, the US Energy Information Administration (EIA), the official US agency, reported an estimated inventory build of 3.9 million barrels for the week to September 27, driven by the latest escalation in the Middle East.

The inventory change compared with a draw of 4.5 million barrels for the previous week, which also saw declines in fuel inventories.

It also compared with the American Petroleum Institute’s estimate, which pegged crude oil inventory change for the final week of September at a negative 1.5 million barrels.

Global oil prices headed north on Tuesday as Middle East tensions surged interests with Iran reportedly preparing to launch a missile attack on Israel.

As of press time, Brent crude traded at $73.61 per barrel, up 4.2% (+$3.00) while the US West Texas Intermediate (WTI) crude was at $70.16 per barrel, up 4.5% (+$3.08).

Reports from U.S. officials suggest that an Iranian missile strike is imminent—the specter of which is driving uncertainty across global markets.

The possibility of an attack will heighten the risk of supply disruptions as conflict could further spread or target key infrastructure in oil-producing nations.

The development is happening due to recent Israeli military actions against Hezbollah in southern Lebanon.

Market analysts noted that the move has further heightened fears of a broader regional conflict since Iran has a significant influence on the region’s oil flows. This means an escalation in military activity has the potential to hinder exports, driving prices higher.

The world’s largest economy, the US has shown support for Israel’s defense and warned Iran of severe consequences if an attack is carried out.

According to Reuters, the Organisation of the Petroleum Exporting Countries and its allies known as OPEC+ is unlikely to recommend any changes to its current deal to reduce production and to start unwinding some cuts from December when it meets this week.

OPEC+ will hold an online joint ministerial monitoring committee (JMMC) meeting on Wednesday (October 2) at 1200 GMT (1pm Nigerian time).

OPEC+ is currently cutting output by a total of 5.86 million barrels per day, which represents about 5.7 percent of global demand, in a series of steps agreed since late 2022.

Its latest agreement calls for OPEC+ to raise output by 180,000 barrels per day in December, part of a plan to gradually unwind its most recent layer of voluntary cuts during 2025.

OPEC+ delayed the start of phasing out the output cuts, initially planned for this month but now the group expects to start bringing back supply to market in December, if the market conditions are more favourable.

The Organization of the Petroleum Exporting Countries (OPEC) has raised its projections for world oil demand in its latest World Oil Outlook published on Tuesday.

The cartel sees oil demand rising to 118.9 million barrels per day (bpd) by 2045, 2.9 million bpd higher than it predicted in the previous year. The outlook also expects demand to hit 120.1 million bpd by 2050.

“Future energy demand is found in the developing world due to increasing populations, middle class and urbanization,” said OPEC Secretary General Haitham Al Ghais during the report’s launch in Brazil.

On investment, the organization said the oil industry needs $17.4 trillion through 2050 to further expand production and sustain the sector.

“All policymakers and stakeholders need to work together to ensure a long-term investment-friendly climate,” Al Ghais wrote.

OPEC also increased its medium-term demand projection on a stronger economy than last year and easing inflationary pressure.

According to OPEC, world oil demand will rise to 111 million bpd and 112.3 in 2028 and 2029, respectively. While the 2028 figure is up 800,000 bpd from last year’s prediction, 2029 forecast is over 6 million bpd higher than that of the IEA, which said in June demand will plateau in 2029 at 105.6 million bpd.

The gap is larger than the combined output of OPEC members Kuwait and the United Arab Emirates.

In 2020, OPEC made a shift when the pandemic hit oil demand, saying consumption would plateau in the late 2030s. It has begun raising forecasts again as oil use has recovered.

By 2050, there will be 2.9 billion vehicles on the road, up 1.2 billion from 2023, OPEC forecast. Despite electric vehicle growth, vehicles powered by a combustion engine will account for more than 70% of the global fleet in 2050, the report said.

“Electric vehicles are poised for a larger market share, but obstacles remain, such as electricity grids, battery manufacturing capacity and access to critical minerals,” it said.