Oil prices have increased due to tensions between Iran and the US, and Washington was set to announce new sanctions on Tehran.

Brent futures rose 9 cents at $65.29 a barrel, while West Texas Intermediate crude edged up 50 cents at $57.93 a barrel, Reuters reported.

US President Donald Trump said that he called off a military strike on Iran and that the potential death toll would be disproportionate. Prior to this, Trump sent a message to Tehran warning that a military attack on Iran was imminent in retaliation for attacking a US drone by Iran.

Oil prices surged after Iran Forces shot down the aircraft, which as claimed by the US, was in international airspace. Tehran said that the aircraft was over its territory.

US Secretary of State Mike Pompeo said that Washington will announce “significant” sanctions on Iran in a bid to further choke off resources used by Tehran to fund its activities in the region.

Oil prices further gained support on news that global supply is expected to remain tight as OPEC and its members including Russia are likely to extend their supply cut deal at their meeting from 1-2 July in Vienna, according to analysts.

US investment bank Jefferies was quoted by Reuters as saying: “An extension of OPEC+ production cuts through the end of the year seems highly likely given recent price action.

“The market expects an extension though, and any failure could see oil price gap down. The probabilities favour restraint however.”

Russian Energy Minister Alexander Novak said that oil markets stabilised due to international cooperation on crude production.