Oil Gains 1.5% as Fears of Iran Attack Grow

Oil prices climbed about 1.5% on Thursday, marking a third consecutive session of gains, as growing fears of a possible U.S. military strike on Iran heightened concerns over potential supply disruptions in the Middle East.

Brent crude futures rose 94 cents, or 1.4%, to $69.34 a barrel by 0730 GMT, while U.S. West Texas Intermediate (WTI) crude advanced 92 cents, or 1.5%, to $64.13 a barrel. Both benchmarks have gained roughly 5% since Monday and are trading at their highest levels since September 29.

The rally has been driven largely by escalating geopolitical tensions after U.S. President Donald Trump intensified pressure on Iran over its nuclear programme, including threats of military action. The arrival of a U.S. naval group in the region has further fuelled market anxiety. 

DBS Bank’s energy sector lead, Suvro Sarkar, said oil prices were being supported primarily by a geopolitical risk premium linked to Iran and the wider Middle East, while noting that unplanned outages in Kazakhstan and weather-related disruptions in the United States had also provided short-term support.

“The main driver of oil prices remains geopolitical risk premium surrounding Iran and the Middle East, though ‍unplanned outages in Kazakhstan and U.S. (Winter Storm Fern) have had temporary impact as well.”

Iran is the fourth-largest producer within the Organisation of the Petroleum Exporting Countries (OPEC), pumping about 3.2 million barrels per day.

Reuters reported on Thursday, citing U.S. officials familiar with the discussions, that Trump is weighing options that could include strikes on Iranian security forces and leadership in a bid to trigger protests and destabilise the current government.

In Kazakhstan, production at the Tengiz oilfield is being gradually restored after electrical fires curtailed output last week, with full production expected within a week. Meanwhile, U.S. oil and gas producers have begun restarting wells after extreme cold linked to Winter Storm Fern disrupted operations over the weekend.

Prices were further supported by a larger-than-expected drawdown in U.S. crude inventories, which eased concerns about oversupply. 

Data from the Energy Information Administration showed that crude stockpiles fell by 2.3 million barrels to 423.8 million barrels in the week ended January 23, defying analysts’ expectations of a 1.8 million-barrel increase.

Some analysts now see room for further upside. An analyst at Citi said the risk of military action against Iran has added an estimated $3 to $4 per barrel to oil prices, warning that further escalation could push Brent crude to $72 a barrel over the next three months.