Oil extends gains as Middle East hostilities flare and talks stall

Brent futures gain $2.3, or 2.4%, to $98.30 a barrel

Oil ‌prices rose more than 2% on Wednesday, extending gains from the previous session, as hostilities in the Middle East erupted anew and talks between Tehran and Washington showed little ​progress.

Brent futures gained $2.3, or 2.4%, to $98.30 a barrel at 0841 ​GMT, while US West Texas Intermediate (WTI) crude climbed $2.34, or 2.5%, ⁠to $96.10. Brent and WTI hit their highest since May 27 and May ​22, respectively, earlier in the day.

Iran launched ballistic missiles towards regional neighbours ​Kuwait and Bahrain and US forces conducted strikes on Iran's Qeshm Island.

Tom Baker, a managing director for Bahrain for global commodities trader Vitol, told an energy conference on ​Tuesday that the global oil market was underpricing some risks from the Iran war, ​even as the conflict entered its fourth month.

The International Energy Agency's warning that ‌global oil inventories could hit critical levels ahead of the peak summer demand period if stock draws continue at their current pace was adding to the bullish sentiment.

Read: Oil sales see sharp 30-month drop

"The stalling in the US-Iran negotiations and IEA warnings of critical ​global low stock levels ​are adding ⁠upward layers in risk premium in benchmark prices," said Emril Jamil, a senior analyst for oil at LSEG.

US crude ​oil inventories fell for a seventh straight week last ​week, ⁠according to market sources citing American Petroleum Institute data released on Tuesday. Crude stocks declined by 6.8 million barrels in the week ended May 29, ⁠the sources ​said.

US government data on stockpiles is due ​at 10:30 a.m. ET (1430 GMT) on Wednesday.