Oil jumps to 6-month high on growing bets of imminent US strike on Iran
Key Highlights
- Oil prices reached their highest levels since mid-summer, with Brent at $70.70/bbl and WTI at $65.42/bbl.
- Escalating US-Iran tensions, including military threats and rhetoric, have heightened fears of supply disruptions in the Persian Gulf.
- Iran, a major OPEC producer, could potentially block exports, tightening global markets and pushing prices higher.
- Market analysts note that geopolitical premiums have added about $3–4/bbl to current prices.
- While the risk of full Iranian supply disruption remains limited, even partial disruptions could sustain the current price rally.
Oil prices surged on Jan. 29, with global benchmarks settling at their highest levels since mid-summer, as escalating tensions between the US and Iran prompted markets to price in a rising risk of supply disruption.
Brent crude futures for March delivery climbed 3.4% to settle at $70.70/bbl on ICE Futures Europe, marking their highest close since July 31, according to Dow Jones Market Data. West Texas Intermediate (WTI) for March rose 3.5% to $65.42/bbl on the New York Mercantile Exchange (NYMX), its strongest finish since Sept. 26. Prices had already reached 4-month highs a day earlier following renewed threats from President Donald Trump toward Tehran.
Geopolitical concerns intensified after US Defense Secretary Pete Hegseth said at a cabinet meeting that the military was prepared to deliver “whatever this president expects of the War Department,” according to Reuters. The remarks underscored a more confrontational tone from Washington.
Iran currently produces about 3.3 million b/d of crude, the third-largest crude producer in the Organization of the Petroleum Exporting Countries (OPEC) behind Saudi Arabia and Iraq in 2025.
“The escalating rhetoric against Iran raises the probability of military action which, combined with an Iranian response, could disrupt shipping in the Persian Gulf,” said Michael Lynch, president of Strategic Energy & Economic Research. “It also raises the risk that Iran’s oil exports could be blockaded, which would significantly tighten global markets.”
Trump reinforced that message in a social media post on Wednesday, warning that a “massive armada” was heading toward Iran and urging Tehran to “negotiate a fair and equitable deal — no nuclear weapons,” adding that “time is running out.” Iran’s mission to the United Nations responded by saying it remained open to dialogue but cautioned that, “if pushed, it will defend itself and respond like never before.”
Prolonged oil price spike?
Market participants said even limited supply disruptions could be sufficient to underpin the current rally. “If even a portion of Iranian supply is removed from the market, that alone could sustain recent gains,” said Josh Young, chief investment officer at Bison Interests. Any further upside, he added, would hinge on the scale of potential supply losses and whether additional producers or key transit routes are drawn into the conflict.
Citi analysts noted that elevated geopolitical tensions, US sanctions on Russian oil, and robust Chinese import demand were likely to keep prices elevated in the near term, estimating that the geopolitical premium had added roughly $3–4/bbl to crude prices.
However, analysts from Kepler Cheuvreux argued that while oil prices could rise short-term on the risk premium, the probability of broad Iranian supply disruption remains limited, as they see Washington’s primary objective focused on Iran’s nuclear program rather than a full-scale bombing campaign—potentially curbing a prolonged spike.