Oil prices were nearing seven-month highs on Wednesday as concerns over a potential military conflict between the US and Iran, which could disrupt supply, continued to worry investors ahead of scheduled talks between the two parties on Thursday.

Brent futures were up 43 cents, or 0.6%, at $71.20 per barrel at 0400 GMT. WTI futures rose 38 cents, or 0.6%, to $66.01, The Caspian Post reports, citing foreign media.

Brent prices reached their highest since July 31 on Friday, while WTI hit its highest since August 4 on Monday, and both contracts have held near there as the US has positioned military forces in the Middle East to compel Iran to negotiate an end to its nuclear and ballistic missile program.

An extended conflict could disrupt supplies from Iran, the third-biggest crude producer in the Organization of the Petroleum Exporting Countries, and other countries in the key Middle East producing region.

"This uncertainty means the market will continue to price in a large risk premium and remain sensitive to any fresh developments," ING commodities strategists said on Wednesday.

US envoys Steve Witkoff and Jared Kushner are slated to meet with an Iranian delegation for a third round of talks on Thursday in Geneva.

Iran's Foreign Minister Abbas Araqchisaidon Tuesday that a deal with the US was "within reach, but only if diplomacy is given priority".

"(US) President (Donald) Trump has warned that without a deal, there will be 'very bad consequences'. Whether (Iran's) concessions will meet the US's 'zero enrichment' red line remains to be seen," Tony Sycamore, IG market analyst, said in a note.

Amid the heightened tensions, Iran and China haveacceleratedtalks to purchase Chinese anti‑ship cruise missiles, according to Reuters sources, which could target the US naval forces that have assembled near the Iranian coast.

Anti‑ship cruise missiles would enhance Iran's strike capabilities and threaten the US naval forces, according to experts.

Trump willdeliverthe traditional State of the Union address to Congress on Tuesday evening. Two White House officials, speaking on condition of anonymity, said Trump will discuss his plans for Iran but did not offer details.

While geopolitical tensions have supported prices, the market is also contending with concerns of large inventory gains as global supply is exceeding demand.

According to market sources, the American Petroleum Institute late on Tuesday reported a massive increase in US oil stockpiles of 11.43 million barrels in the week ended February 20.

However, gasoline and distillate inventories fell, the sources said, citing the API data.

Official US oil inventory reports from the Energy Information Administration are due later on Wednesday.