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Oil prices jump as downed U.S. drone stokes Middle East tensions

Tensions have been rising in the Middle East after last week's attacks on two tankers near the Strait of Hormuz, a chokepoint for oil supplies. Reports out of Iran said the nation's Revolutionary Guards had downed a U.S. "spy" drone in the southern province of Hormozgan.

The drone was downed in international airspace over the Strait of Hormuz by an Iranian surface-to-air missile, a U.S. official said on Thursday, speaking on condition of anonymity.

Fears of a confrontation between Iran and the United States have mounted, with Washington blaming Tehran for the tanker attacks and Tehran denying any role.

Oil prices climbed around 3% on Thursday amid escalating tensions in the Middle East.

Oil prices had risen earlier in the day supported by signs of improving demand in the United States, an agreement between OPEC and other producers on a date for a meeting to discuss output cuts and signs that the U.S. and China were resuming talks to resolve a trade war that is threatening global growth.

U.S. West Texas Intermediate (WTI) crude futures were up $1.73, or 3.2%, at $55.49 a barrel.

Brent crude futures were up $1.93, or 3.1%, at $63.75 a barrel around 0650 GMT, after rising as high as $63.88.

After swelling to near two-year highs, U.S. crude stocks fell by 3.1 million barrels last week, compared with analyst expectations for a draw of 1.1 million barrels, the Energy Information Administration (EIA) said on Wednesday.