Changes dateline, byline, adds analyst comment, updates with prices

By Siddharth Cavale

NEW YORK, March 26 (Reuters) - Oil prices rose 5% on Thursday, rebounding from the previous session's losses, on worries that a prolonged Middle East conflict could continue to disrupt supplies.

Brent futures LCOc1 were up $5.26, or 5.2%, to $107.48 a barrel at 10:57 am EDT (1457 GMT), close to the session high of $107.84. U.S. West Texas Intermediate crude futures CLc1 gained $3.53, or 4%, to $93.85 a barrel, after rising to as high as $94.84.

Both benchmarks slumped more than 2% on Wednesday.

Iran is reviewing a U.S. proposal to end the war, but has no intention of holding talks to end the conflict, Iran's foreign minister said on Wednesday.

U.S. President ​Donald Trump warned Iran on Thursday to "get serious" about a deal to end nearly four weeks of fighting, a day after White House press secretary Karoline Leavitt said the U.S. will hit Iran harder if Tehran fails to accept that the country has been "defeated militarily."

"There's purely confusion and frustration over the veracity of stories coming out of the United States and Iran. Investors are once again rotating into safer assets in an effort to preserve capital," said Timothy Snyder, chief economist at Matador Economics.

The Pentagon is planning to send thousands of airborne troops to the Gulf to give Trump more options for a ground assault, sources have told Reuters, adding to two Marine contingents already en route. On the Iranian side, Yemen's Iran-aligned Houthi movement said it stands ready to strike the key Red Sea waterway again in solidarity with Tehran, a Houthi ‌leader told Reuters.

"Ongoing military escalation, including troop deployments and fresh strikes, alongside limited tanker movement under strict Iranian conditions, continues to strain global energy markets," MUFG analyst Soojin Kim said.

TRUMP'S 15-POINT PLAN

The 15-point U.S. proposal, sent through Pakistan, would remove Iran's stocks of highly enriched uranium, halt enrichment, curb its ballistic missile program and cut funding for regional allies, three Israeli cabinet sources familiar with the plan said.

The conflict has nearly halted shipments through the Strait of Hormuz, which typically carries about a fifth of the world's crude oil and LNG supply, in what the International Energy Agency has called the biggest oil supply disruption ever.

Iraq's oil production has slumped, with storage tanks reaching high and critical levels, three Iraqi energy officials said on Wednesday. Iraq was the second-biggest crude producer in OPEC behind Saudi Arabia in 2025, according to U.S. Energy Information Administration data.

Japanese Prime Minister Sanae Takaichi asked IEA chief Fatih Birol for an additional coordinated release of oil stockpiles on Wednesday, as Tokyo seeks to hedge against a prolonged conflict.

Adding to supply concerns, at least 40% of Russia's oil export capacity is halted following Ukrainian drone attacks and the seizure of tankers, according to Reuters calculations based on market data. On Thursday, Russia's Kirishinefteorgsintez oil refinery, one of the largest in the country, halted processing on Thursday following Ukrainian drone attacks that caused fires in some parts of the plant, two industry sources said.

Russia's oil pipeline monopoly Transneft will try to redirect oil exports from damaged Baltic Sea ports, Interfax news agency reported on Thursday, citing the head of the company.

Turkey's transportation minister said on Thursday a marine drone struck a Turkish crude oil tanker that departed Russia, causing an explosion near Istanbul's Bosphorus strait.

U.S. crude inventories rose by 6.9 million barrels to 456.2 million barrels in the week ended March 20, the highest level since June 2024 and far exceeding analyst expectations. EIA/S