Israel's end of hostilities may trigger resumption of peace talks: File Image/Pixabay

With chances of a peace agreement between the U.S. and Iran – as well as the current ceasefire – rapidly deteriorating, oil on Wednesday enjoyed another round of gains – while steep stockpile draws in the U.S. signalled severe market tightness this summer and beyond.

Brent settled up $1.81, or 1.8 percent, at $97.81 per barrel, and West Texas Intermediate settled up $2.26, or 2.4 percent, to $96.02.

Simon-Peter Massabni, head of business development at XS.com, said in a note, "Crude prices continue to solidify their upward trajectory as accelerating clashes between the United States and Iran outpace stagnant diplomatic efforts."

Indeed, one person was killed and dozens injured when Iran fired ballistic missiles toward Kuwait and Bahrain; the U.S. conducted strikes on Iran’s Qeshm Island; and Israel pursued its deepest incursion into Lebanon in 25 years.

Still, Iranian foreign minister Abbas Araqchi told media that Tehran and Washington were studying texts related to peace negotiations – but that fighting in Lebanon would have to stop if negotiations were to resume.

After Wednesday's session ended, Washington announced that it had brokered a ceasefire breakthrough between Israel and Lebanon and that work towards peace would commence, providing Iran-backed Hezbollah creased all attacks. 

The blocked Strait of Hormuz remained the primary concern for industry and analysts; Kuwait Petroleum Company said even if the Strait reopened in coming days, expects it will take considerably longer to restore oil production than traders assume.

Specifically, the company’s managing director for international marketing, Shaikh Khaled Ahmad Al-Sabah, said his country would need six to eight weeks to recover roughly 70 percent of normal production levels, and another month to restore the remaining 30 percent.

Meanwhile, the Energy Information Administration reported on Wednesday that U.S. crude stockpiles fell by 8 million barrels to 433.7 million barrels in the week ended May 29, compared with expectations for ⁠a 4 million barrel draw.

As for other potential oil trading influencers, a report released Wednesday from the Institute for Supply Management said growth accelerated more last month for U.S. construction, agricultural and other services than economists expected.

However, the report added that businesses are feeling the pinch of higher prices caused by tariffs and more expensive oil.