**MARKET BRIEF: Oil Rallies on US-Iran Naval Clashes** **Global oil prices** have extended gains in early trading today, Wednesday, **February 4, 2026**, driven by renewed military friction in the Middle East and a massive drop in U.S. crude inventories. **Price Action** Benchmark indices are trading higher as risk premiums re-enter the market: * **Brent Crude** is up roughly **0.8%**, trading near **$67.89** per barrel. * **WTI Crude** has climbed approximately **1.0%**, hovering around **$63.84** per barrel. **Key Drivers: Middle East Tensions** Buying pressure surged following reports of direct confrontations in the **Strait of Hormuz** and the Arabian Sea. The U.S. military confirmed it shot down an Iranian drone that aggressively approached the *Abraham Lincoln* aircraft carrier. Simultaneously, maritime security sources reported that Iranian gunboats harassed a U.S.-flagged tanker, the *Stena Imperative*, north of Oman. These incidents have cast doubt on the viability of diplomatic talks between Washington and Tehran scheduled for this Friday. **Supply Fundamentals** Beyond geopolitics, fundamentals provided strong support. The American Petroleum Institute (API) reported a significant draw in U.S. crude inventories of **11.1 million barrels** for the last week—far exceeding analyst expectations. Traders are now awaiting official EIA data later today to confirm this tightening of supply. **Market Outlook** Volatility is expected to remain high through the end of the week. While **OPEC+** has signaled it may maintain current production cuts until March, the immediate focus remains on whether diplomatic channels can prevent further military escalation in the Gulf.