Oil prices rose on Thursday after Iran seized an oil tanker off the coast of Oman, raising the prospect of escalating conflict in the Middle East.

Brent crude futures were up $1.60, or 2.1%, to $78.40 a barrel at 1413 GMT and US West Texas Intermediate crude futures were up $1.70, or 2.4%, to $73.07.

Iran seized a tanker with Iraqi crude destined for Turkey on Thursday in what appeared to be a retaliation for the seizure last year of the same vessel by Tehran’s arch foe the United States, Iranian media reported.

The tanker St Nikolas, which last year was confiscated by the United States for carrying Iranian oil, was boarded by armed intruders as it sailed close to the Omani city of Sohar, according to British maritime security firm Ambrey.

The previous day Yemen-based Houthis mounted their largest attack yet on commercial shipping lanes in the Red Sea and Israeli strikes in southern and central Gaza also intensified.

The United States and Britain hinted they would take further measures if the attacks continued. The United Nations Security Council, meanwhile, passed a resolution demanding an immediate end to the Houthi strikes.

The oil benchmarks had settled lower on Wednesday after a surprise jump in US crude stockpiles raised concerns over demand in the world’s largest oil market.

US crude inventories rose by 1.3 million barrels to 432.4 million barrels in the week ended Jan 5, the EIA said on Wednesday, against analyst expectations for a draw of 700,000 barrels.

Meanwhile, data on Thursday showed headline US consumer inflation rose 3.4% in December on a yearly basis versus a 3.2% increase expected by economists polled by Reuters. On a monthly basis, it rose 0.3% versus the anticipated 0.2% increase.

Also, read this

Crude oil prices may remain low in early 2024, say analysts

Coal is new gold as researchers redefine its role in electronics

Oil prices predicted to fall as production declines

The higher than expected rise could delay a much anticipated interest rate cut in March from the Federal Reserve.

“Slowing demand, unrest in Middle East and muted price reaction have producers, consumers and market participants alike feeling paranoid about oil prices,” Barclays said on Thursday as the bank lowered its 2024 Brent forecast by $8 to $85 a barrel.

Meanwhile, Chinese refiners asked for less Saudi crude oil in February, people with knowledge of the matter said, despite the world’s top oil exporter announcing its biggest price cut in 13 months.

Looking ahead, China’s customs administration will release December trade data on Friday, giving a full-year picture of overall demand in the world’s largest oil importer.