Oil prices continued to rise on Wednesday after a report showed a drop in U.S. crude and gasoline inventories. The market is also closely monitoring the potential escalation of conflict in the Middle East, which could impact global oil supplies.

As of 05:40 GMT, Brent crude futures were up 56 cents, or 0.7%, at $81.25 per barrel. West Texas Intermediate (WTI) U.S. crude futures also rose by 59 cents, or 0.8%, to $78.94 per barrel.

Vivek Dhar, an analyst at the Commonwealth Bank of Australia, noted that any escalation in the Middle East conflict poses a significant risk to oil prices over the next six months or longer. He added that the extent of the mutual responses between Iran and Israel will likely determine whether the current conflict in the Middle East expands into a broader regional conflict.

Analysts at ANZ Research stated in a note on Wednesday that if the conflict in the Middle East widens, it could threaten Iranian oil supplies as well as oil flows through key choke points in the Middle East. They added that this could potentially disrupt over 20 million barrels of oil per day.

Market sources cited American Petroleum Institute (API) data on Tuesday, indicating that U.S. crude and gasoline inventories fell last week while distillate stocks rose. According to API figures, crude stocks fell by 5.21 million barrels in the week ending August 9, sources said. Gasoline inventories also dropped by 3.69 million barrels, while distillate stocks increased by 612,000 barrels.

A decrease in inventories may suggest an increase in demand in the United States, the world’s largest oil consumer.