While safe haven gold pushed almost two percent higher, the news from CNN appeared to be having little detrimental effect on Asian equities, with most extending the previous day's rally.
Still, investors are keeping tabs on China-US relations after Beijing hit out at Washington's "bullying" over chip export controls, just over a week after the two sides dialled down trade tensions by temporarily slashing eye-watering tit-for-tat tariffs.
Both main crude contracts jumped more than one percent after CNN reported multiple US officials as saying the government had received intelligence indicating Israel was preparing to target Iranian atomic facilities.
There are fears that such a sharp escalation could tip the Middle East into a war, with tensions already high over Israel's strikes on Gaza.
US President Donald Trump said last week that "I think we're getting close to maybe doing a deal" on Tehran's nuclear programme and then a day later called on the Islamic republic to "move quickly or something bad is going to happen".
But Iran's supreme leader Ayatollah Ali Khamenei warned Tuesday that nuclear talks with Washington were unlikely to yield any results after four rounds of Omani-mediated nuclear talks with the United States since April 12.
"This is the clearest sign yet of how high the stakes are in the US Iran nuclear talks and the lengths Israel may go to if Iran insists on maintaining its commercial nuclear capabilities," Robert Rennie, at Westpac Banking Corp, said.
"Crude will maintain a risk premium as long as the current talks appear to be going nowhere."
Crude prices have risen around 15 percent since the start of the month on softening worries about the economic outlook as tariff tensions grow relatively calmer.
Equities mostly built on Monday's gains in Asia on trade talk hopes.
Hong Kong, Shanghai, Sydney, Seoul, Wellington, Taipei and Manila and Mumbai outshone Tokyo, Singapore and Bangkok.
But London fell and the pound strengthened against the dollar after UK inflation data come in well above forecasts in April.
The dollar also lost pace against the euro and yen ahead of an upcoming G7 finance ministers meeting this week, with speculation growing that Trump is open to a weaker greenback to help US exporters.
Paris and Frankfurt also sank.
The recent detente between China and the United States suffered a jolt Wednesday when Beijing slammed Washington's "bullying" chip export controls.
It also warned it would take steps against measures aimed at restricting Chinese access to high-tech semiconductors and supply chains.
The remarks came after US officials last week unveiled guidelines warning firms that using Chinese-made high-tech AI semiconductors, most notably tech giant Huawei's Ascend chips, would put them at risk of violating US export controls.
Several Federal Reserve members appeared to dampen hopes they will cut US interest rates anytime soon as they warned over the effects of Trump's tariffs on the economy and inflation.
St. Louis Fed chief Alberto Musalem warned the measures would likely hurt growth and jobs, even as countries look to dial down the blistering tariffs the president proposed.
"Even after the de-escalation of May 12 (with China), they seem likely to have a significant impact on the near-term economic outlook," Musalem said.
"On balance, tariffs are likely to dampen economic activity and lead to some further softening of the labour market."
He added that "committing now to ignoring higher inflation from tariffs, or to easing policy, runs the risk of underestimating the level and persistence of inflation".
Atlanta Fed chief Raphael Bostic said Moody's ratings cut and Trump's proposed tax cuts could compound uncertainty and force officials to keep rates elevated.
- Key figures at around 0810 GMT -
West Texas Intermediate: UP 1.2 percent at $63.76 per barrel
Brent North Sea Crude: UP 1.1 percent at $66.10 per barrel
Tokyo - Nikkei 225: DOWN 0.6 percent at 37,298.98 (close)
Hong Kong - Hang Seng Index: UP 0.6 percent at 23,827.78 (close)
Shanghai - Composite: UP 0.2 percent at 3,387.57 (close)
London - FTSE 100: DOWN 0.2 percent at 8,767.59
Euro/dollar: UP at $1.1322 from $1.1284 on Tuesday
Pound/dollar: UP at $1.3420 from $1.3391
Dollar/yen: DOWN at 143.90 yen from 144.47 yen
Euro/pound: UP at 84.41 pence from 84.26 pence
New York - Dow: DOWN 0.3 percent at 42,677.24 (close)
dan/mtp
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