Crude oil prices rose Thursday to reach their high levels since September after the Trump Administration warned Iran may face military strikes if the country does not negotiate a new nuclear agreement.
The price of Brent crude oil (BZ=F) jumped as much as 4.3% to briefly cross $70 per barrel for the first time since September before paring gains. The US pricing benchmark, West Texas Intermediate (CL=F) crude, gained as much as 4.7% to trade above $65 at its highs of the day.
The gains add to a run-up over the past month that has seen oil rise roughly 15% as geopolitical risk premiums and record cold weather in the US have buoyed prices.
“Oil markets are rapidly repricing geopolitical risk as the probability of direct US action against Iran rises,” said Rystad Energy head of geopolitical analysis Jorge Léon.
“The speed of the oil price reaction suggests markets see US military action against Iran as a real, near-term risk.”
The US military has positioned naval vessels and other equipment capable of striking inside the country over the past week as President Trump has ratcheted up threats of action against the Iranian regime over a new nuclear weapons deal with the US.
“A massive Armada is heading to Iran. It is moving quickly, with great power, enthusiasm, and purpose … Like with Venezuela, it is, ready, willing, and able to rapidly fulfill its mission, with speed and violence, if necessary,” the president wrote in a Truth Social post on Wednesday.
“Hopefully Iran will quickly ‘Come to the Table’ and negotiate a fair and equitable — NO NUCLEAR WEAPONS — one that is good for all parties. Time is running out, it is truly of the essence!”
If Iran won’t negotiate, the president said, “The next attack will be far worse!” — a reference to the US’s strikes last summer on Iran’s Fordow Uranium Enrichment Plant.
The tensions between Washington and Tehran have kept worries alive around potential disruptions to the Strait of Hormuz.
The strait sees roughly 20 million barrels of crude oil and other petroleum products cross its waters every day, according to the Energy Information Administration, and disruptions would have wide ripple effects on supply and pricing.
On top of the geopolitical risk, the US crude market also saw an unexpected tightening last week.
Commercial crude inventories in the US for the week ended Jan. 23 decreased by 2.3 million barrels from the previous week, according to data released Wednesday by the Energy Information Administration. Analysts at Macquarie had expected a growth of 900,000 barrels.
