Global oil prices jumped sharply on Thursday as rising geopolitical tensions involving Iran fuelled fears of supply disruptions, pushing Brent crude to its highest level in four months.
Markets reacted nervously to growing concerns over the potential impact of a possible U.S. military strike on Iran, a major oil producer and a key player within the Organization of the Petroleum Exporting Countries (OPEC).
Brent oil futures climbed as high as $70.35 a barrel, their strongest level since late September, while U.S. West Texas Intermediate crude briefly topped $65 a barrel, also reaching a four-month high.
Analysts said the price rally reflected a widening geopolitical risk premium as investors weighed the consequences of escalating tensions in the Middle East.
“The immediate market concern is the collateral damage done if Iran takes a swing at its neighbours or, more tellingly, closes the Strait of Hormuz.”
PVM analyst John Evans
He warned that such a move would threaten a significant portion of the world’s oil flows and could trigger extreme price volatility.
Iran currently produces about 3.2 million barrels of oil per day, making it OPEC’s fourth-largest producer. Analysts note that even a limited conflict could disrupt exports or infrastructure, tightening an already fragile supply-demand balance.
U.S. Pressure on Tehran
Tensions have intensified after U.S. President Donald Trump stepped up pressure on Tehran to end its nuclear programme. Recent developments include renewed threats of military action and the deployment of a U.S. naval group to the region, moves that have heightened market unease.
According to a Reuters report citing U.S. officials, Trump is considering options that include targeted strikes against Iranian security forces and leadership figures, with the aim of encouraging internal unrest that could weaken the country’s ruling establishment.
While no final decision has been announced, the prospect of military confrontation has already rattled energy markets.
Analysts at Citi said the growing uncertainty has added a significant geopolitical premium to oil prices.
“The potential for Iran getting hit has escalated the geopolitical premium of oil prices by potentially $3 to $4 per barrel,” the bank noted. Citi added that further escalation could push Brent prices as high as $72 a barrel over the next three months.
Supply Disruptions Add to Price Pressure
Beyond Middle East tensions, temporary supply disruptions elsewhere have also supported oil prices. In Kazakhstan, production at the giant Tengiz oilfield is being restored in phases after electrical fires forced output cuts last week.
Operators are aiming to return to full production within a week, though the outage has added to near-term supply concerns.
In the United States, crude oil and natural gas producers have been bringing wells back online following disruptions caused by extreme cold linked to Winter Storm Fern.
The storm affected output across several producing regions, briefly tightening supply in the world’s largest oil-producing nation.
DBS Bank’s energy sector team lead, Suvro Sarkar, said geopolitical risks remain the dominant driver of prices.
“The main driver of oil prices remains the geopolitical risk premium surrounding Iran and the Middle East,” he said, adding that unplanned outages in Kazakhstan and weather-related disruptions in the U.S. have had a more temporary impact.
Outlook Hinges on Geopolitical Developments
While some supply issues are expected to ease in the coming days, analysts caution that oil markets are likely to remain sensitive to political developments involving Iran and the wider Middle East.
Any sign of escalation, particularly involving the Strait of Hormuz, could send prices sharply higher, while de-escalation could ease some of the recent gains.
For now, traders and investors are closely monitoring diplomatic signals from Washington and Tehran, aware that geopolitical risk remains a powerful force shaping global energy markets.
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