Oil prices rise as U.S.-Iran tensions escalate

Oil prices rose Wednesday as escalating tensions between the U.S. and Iran fuel concerns over further disruptions to Middle East energy supplies.

U.S. benchmark West Texas Intermediate futures for October delivery jumped 1.75% to $94.66 a barrel. Futures for Brent crude , the international benchmark, added 1.55% to $99.44 a barrel.

The U.S. military destroyed five Iranian crude tankers Tuesday in retaliation for attempted attacks on an American warship. The U.S. warship successfully evaded Iranian attack and no American personnel were harmed, Centcom said in a statement.

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, according to Daan Struyven, co-head of global commodities research at Goldman Sachs.

"It's definitely plausible," Struyven told CNBC's "Squawk Box Asia" when asked whether oil could reach $120 a barrel. Goldman's base case remains for Persian Gulf exports to gradually recover as producers adapt to disruptions, including through alternative shipping routes and eventually additional pipeline capacity.

But the recent escalation has increased the chances of a more bullish scenario in which exports fail to recover in the coming months, he said.

"The developments over the last few days do suggest that that alternative upside price scenario, where exports actually stagnate over the coming few months, and where Brent exceeds $120 is the probability of that scenario is definitely going up as we're seeing an intensification and broadening of the shipping attacks," Struyven said.

U.S.-Iran military action had been on pause for about a month, with Washington pivoting to applying economic pressure on Tehran, only to resume strikes towards the end of last month.