(Reuters) – Oil rose on Tuesday as an attack by the Iran-aligned Houthis on a chemical tanker escalated geopolitical tension in the Middle East, though concerns over excess supply and slowing demand kept a lid on gains.

A cruise missile launched from Houthi-controlled Yemen struck a commercial chemical tanker, causing a fire and damage but no casualties in the latest such attack to heighten safety risks for tankers in vital shipping lanes.

Brent crude futures for February rose 21 cents, or 0.3%, to $76.24 a barrel by 0915 GMT, while U.S. West Texas Intermediate crude futures for January delivery gained 27 cents, or 0.4%, to $71.59.

Although the attack on the vessel has helped oil to rally, “sentiment remains negative,” said Tamas Varga of broker PVM. “There is no help coming from the demand side of the oil equation. The fundamental backdrop is discouraging.”

Investors were cautious ahead of a crucial U.S. inflation report and interest rate decision. The Consumer Price Index (CPI) report is due on Tuesday, while the Federal Open Markets Committee’s two-day policy meeting will end on Wednesday.

“All attention will be on the U.S. CPI data today to potentially set the tone for U.S. policymakers at their upcoming meeting,” Yeap Jun Rong, market analyst at IG, said in a note.

Also in focus are talks at the COP28 climate summit, where negotiators are awaiting a new draft deal after many countries criticised a previous version as too weak because it omitted a “phase-out” of fossil fuels.

And also coming into view are the latest U.S. inventory reports, which are expected to show a 1.5 million-barrel drop in crude stocks. The first report is at 2130 GMT from the American Petroleum Institute.