Oil prices rise amid escalating U.S.-Iran tensions and supply disruption fears

Oil extended gains on Thursday, amid worries that escalating tensions in the Middle East could further exacerbate supply disruptions.

Futures for international benchmark Brent crude for November delivery gained 0.62% to $101.84 a barrel. U.S. West Texas Intermediate futures for October advanced 1.01% to $96.06 per barrel.

Tensions escalated after the U.S. military on Tuesday destroyed five Iranian crude oil tankers in retaliation for attempted attacks on an American warship. U.S. Central Command said the warship successfully evaded Iranian attack and no American personnel were harmed.

The escalation in the U.S.-Iran conflict, now in its seventh month, is raising the risk of oil prices surging above $120 a barrel as attacks on shipping intensify, said Daan Struyven, co-head of global commodities research at Goldman Sachs, in an interview on CNBC's "Squawk Box Asia."

Meanwhile, U.S. President Donald Trump's top White House advisers have raised privately with him the prospect that the Iran conflict could drag on through the remainder of his term, according to the Wall Street Journal.

The physical market may be tightened even more by a further decline in transit volumes, broader escalation or threats to energy infrastructure, extending the upward move in oil prices, said Andrei Constantin, commercial director and trading adviser at TFP Software FZCO.

"WTI has completely unwound its selloff between early June and July, while Brent prices are now well above those seen in early June," said David Morrison, senior market analyst at Trade Nation.