The price of Brent crude rose above $66 a barrel early this morning, up more than 1%. US light crude WTI rose to $62.73.

According to CNN, new US intelligence indicates that Israel is seriously considering an offensive against Iran's nuclear infrastructure. While no decision has yet been made, several officials in Washington confirm the existence of such plans.

"An escalation of this kind would threaten not only Iranian supply, but also that of the entire region," warn commodity analysts at ING Bank.

Iran, OPEC's third-largest producer, would see its exports severely disrupted in the event of an attack. Tehran could even retaliate by blocking the Strait of Hormuz, through which oil and fuel exports from several major producers such as Saudi Arabia, Kuwait, Iraq, and the United Arab Emirates pass.

Negotiations at a standstill

On the diplomatic front, talks between Washington and Tehran are making little progress. Despite several rounds of negotiations this year, deep disagreements remain. Iran's Supreme Leader Ali Khamenei and US officials expressed skepticism on Tuesday about a quick resolution.

"Indirect talks are ongoing, and an agreement could support oil prices. But for now, they appear to be at an impasse," ING strategists note.

Despite this tense climate, there are some reassuring indicators on the supply side. US crude stocks rose by 2.5 million barrels last week, according to figures released Tuesday by the American Petroleum Institute. Conversely, gasoline and distillate reserves declined.

Investors are now awaiting official data from the US Department of Energy, due later today.