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Oil prices up over escalating tensions in Middle East, positive demand outlook

Oil prices increased on Tuesday with greater supply risks with the rising conflict in the Middle East, while investors await several key supply and demand data sets from the Organization of Petroleum Exporting Countries (OPEC) as well as inflation data from the US Federal Reserve (Fed).

International benchmark Brent crude traded at $82.61 per barrel at 10.41 a.m. local time (0741 GMT) for an 0.48% increase from the closing price of $82.21 a barrel in the previous trading session.

The American benchmark West Texas Intermediate (WTI) traded at $78.25 per barrel at the same time, a 0.41% rise from the previous session that closed at $77.93 per barrel.

Oil prices rose in early Asian trade on Tuesday following US and British airstrikes on Yemen’s coastal province of Al Hudaydah on Monday.

Subsequently, the Houthi group declared that it considered all American and British ships legitimate military targets.

As the Red Sea is one of the world’s most frequently used sea routes for oil and fuel shipments, the escalating tension in the region between the joint forces of the UK and US against the Houthi group raised supply fears and placed upward pressure on oil prices.

The Houthis state their attacks aim to pressure Israel to halt its deadly onslaught on the Gaza Strip, which has killed more than 30,800 people and injured over 72,200 others since an Oct. 7 cross-border offensive by the Palestinian group Hamas.

Investors are additionally focused on the upcoming monthly oil market reports.

The OPEC and the Energy Information Administration (EIA) will release related reports later on Tuesday, while the International Energy Agency (IEA) report will come online on Thursday.

“While we believe the estimates will be largely unchanged, any upside surprise will ease demand concerns,” according to Daniel Hynes, a commodity strategist at Australia and New Zealand Banking Group.

Ahead of the Fed's announcement late Tuesday of key inflation statistics, investors are taking a cautious stance.

While uncertainties continue as to when the Fed will start interest rate cuts, experts predict that Tuesday’s inflation data may provide investors with clues about the bank’s future steps.

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