Oil prices have increased due to tensions in the Middle East after an Iranian drone was reportedly destroyed by the US Navy in the Strait of Hormuz.

Brent crude futures edged up 81 cents at $62.74 a barrel, while West Texas Intermediate crude futures increased 59 cents at $55.89 per barrel, Reuters reported.

US President Donald Trump claimed that the USS Boxer amphibious assault ship destroyed the Iranian drone after it came within about 914m of the vessel.

Speaking at the White House, Trump said: “The Boxer took defensive action against an Iranian drone, which had closed into a very, very near distance, approximately 1,000 yards, ignoring multiple calls to stand down and was threatening the safety of the ship and the ship’s crew.  The drone was immediately destroyed.”

However, Iran denied that it had lost a drone.

Oil prices also increased on signs that the US Federal Reserve will cut rates aggressively to offer support to the economy, according to Vanguard Markets managing partner Stephen Innes.

Innes was further quoted by Reuters as saying: “The fed backstop and the report of the US Navy shooting down an Iranian drone are providing a modicum of support for oil markets amidst a very bearish landscape.”

Due to a slowing global economy amid a trade dispute between the US and China, the International Energy Agency (IEA) is reducing oil demand growth forecast for this year to 1.1 million barrels per day (Mbpd) from the previous 1.2Mbpd.

Jefferies analyst Jason Gammel said that the decision taken by the OPEC+ to extend output cuts should be enough to draw down OECD inventories through the end of the year. In order to balance the oil market, these cuts are required to be extended through to 2020, Gammel added.