CNBC - Oil prices climbed around 3% on Thursday amid escalating tensions in the Middle East as a U.S. official said one of the country�s military drones was shot down by an Iranian missile.

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.

Earlier, reports out of Iran said the nation�s Revolutionary Guards had downed a U.S. �spy� drone in the southern province of Hormozgan.

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.

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 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.

�The geopolitical side is the wild card and can�t be predicted, not just the Iran concerns but also the trade meeting between� President Donald Trump and Chinese President Xi Jinping, said Phin Zeibell, senior economist at National Australia Bank.

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.

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

�It�s a very mixed bag of factors. In the U.S. (oil) demand is likely to be picking up into summer and the OPEC meeting looks like there�s going to be an extension or even more cuts is a possibility,� said Phin Zeibell, senior economist at National Australia Bank.

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. EIA/S

Refined products also posted surprise drawdowns as gasoline demand ticked higher on a weekly basis and surged 6.5% from a year earlier.

Members of the Organization of the Petroleum Exporting Countries (OPEC) agreed to meet on July 1, followed by a meeting with non-OPEC allies on July 2, after weeks of wrangling over dates.

OPEC and its allies will discuss whether to extend a deal on cutting 1.2 million barrels per day of production that runs out this month.

Momentum for an agreement appeared to be building as the United Arab Emirates� energy minister told Al-Bayan newspaper that an extension is �logical and reasonable�.

Expectations the U.S. Federal Reserve could cut interest rates at its next meeting were also supporting oil prices.

�Fresh stimulus from the largest economies will greatly improve the demand-side argument. A positive outcome with the U.S.-China would be icing on the cake,� said Edward Moya, senior market analyst at brokers OANDA.