By Siddharth Cavale
NEW YORK, Nov 5 (Reuters) - Oil prices rose more than $2 a barrel on Thursday, as investors reassessed the outlook for the US-Israeli war with Iran, while new attacks on tankers fed worries about oil supplies.
Brent crude futures rose $2.3, or 2.43%, to $96.92 a barrel by 11:43 a.m. ET (1643 GMT). U.S. West Texas Intermediate crude increased $2.15, or 2.44%, to $90.27 a barrel.
On Wednesday, both benchmarks tumbled more than 8% to their lowest settlement levels since August 31.
"The
situation in the Middle East is still unresolved and that's why there is some modest recovery in prices at the moment," said Giovanni Staunovo, commodity analyst at UBS.
Andy Lipow, president of Lipow Oil Associates, said reports of tankers transiting the Middle East being struck by mines or targeted by drones continue to worry the oil market. Investors are also worried about Iran's unchanged position regarding negotiations with the US.
Attacks on tankers in the Gulf are still running close to a record pace with at least five vessels having reported incidents since Sunday, according to UK maritime security agency UKMTO, around the same rate as in October when the agency said 35 vessels were hit, the most of any month of the war.
The war on Iran, which Trump launched along with Israel in February, resulted in sharply higher fuel prices which became major grievances for voters. Democrats took control of both houses of the US Congress in Tuesday's midterm elections, routing Trump's Republican party.
The new Democratic-controlled Congress takes office in January.
"Markets are assessing the impact of the midterm elections on Donald Trump's next steps with the Iran war, pricing in more likelihood for the war to end," said June Goh, senior oil analyst at Sparta Commodities.
"However, there will be more volatility ahead as the path to full diplomacy to end the war is still fraught with many unknowns while the global strategic reserves have drawn very thin," she said.
Citi said in a note there were concerns that with the midterms over, the White House could focus on its executive powers in foreign policy and potentially escalate the war with Iran.
Eurasia Group lowered its estimate for the chance of renewed US strikes on Iran to 60% from 65%, but also cut the probability of a deal to 10% from 20%, as Iran has held firm on demands that Trump is viewed as unlikely to accept. It raised the likelihood of a continued standoff to 30% from 15%.
Despite the recent drop in oil prices, escalation is likely to produce a sharper increase into a band of $110 to $125 per barrel for Brent, Eurasia Group said in a note.
Meanwhile, Iran's Foreign Minister Abbas Araqchi discussed in separate phone calls with his Saudi and Qatari counterparts the "latest progress" in diplomatic efforts aimed at establishing stability in the region, the Iranian foreign ministry said.
Iran's Islamic Revolutionary Guard Corps said two oil tankers and a tugboat had caught fire in separate incidents after attempting to use unauthorised routes through the Strait of Hormuz.
Crude shipments through this key waterway for most Gulf oil supplies have recovered to close to pre-war levels, according to analysts, though at a higher cost.
(Reporting by Siddharth Cavale in New York, Anna Hirtenstein in London. Additional reporting by Siyi Liu in Singapore; Editing by Joe Bavier, Louise Heavens, Susan Fenton and David Gregorio)
