Oil prices jumped more than 2% on Thursday after Iran's Revolutionary Guards said they targeted a U.S. airbase in response to a U.S. attack in the port city of Bandar Abbas.
Brent crude futures LCOc1 rose $2.34, or 2.48%, to $96.63 a barrel by 0701 GMT, while the more active August contract LCOc2 gained $2.24 or 2.43%, to $94.49. The July contract is set to expire on Friday.
U.S. West Texas Intermediate futures CLc1 were up $2.26, or 2.55%, at $90.94.
Both benchmarks slipped more than 5% to touch their lowest in a month in the previous session on the possibility of a U.S.-Iran deal to end their war and reopen the Strait of Hormuz.
The Islamic Revolutionary Guard Corps said on Thursday it targeted a U.S. airbase after what it described as an early morning U.S. attack near Bandar Abbas airport, Tasnim news agency reported.
It warned that any repeat of what they called aggression would draw a "more decisive" response.
The U.S. military launched new strikes in Iran targeting a military site that officials believed posed a threat to U.S. forces and commercial maritime traffic in the Strait of Hormuz, a U.S. official told Reuters.
"The rise in oil prices highlights the fragility of the current 'no peace, no war' situation between the United States and Iran," said Simon-Peter Massabni, head of business development at XS.com.
"While the market holds onto hopes that the conflict is nearing an end, the increasing frequency of skirmishes between the two sides, coupled with Donald Trump's evident frustration, suggests that this conflict may continue. As a result, the Strait of Hormuz is likely to remain closed," he added.
In the U.S., crude oil stockpiles fell by 2.8 million barrels last week, the sixth straight week of declines, according to American Petroleum Institute data. API/S
Official inventory data from the U.S. Energy Information Administration are due on Thursday, a day later than usual due to the Memorial Day holiday on Monday.
(Reuters - Reporting by Nicole Jao in New York, Sam Li in Beijing and Florence Tan in Singapore; Editing by Muralikumar Anantharaman; Shri Navaratnam, Stephen Coates and Emelia Sithole-Matarise)