BY COMFORT OGBONNA
Brent oil futures jumped sharply on Thursday, climbing to a four-month high as rising geopolitical tensions in the Middle East reignited concerns about potential supply disruptions. The rally was driven largely by fears that the United States could launch a military attack on Iran, a key oil producer within OPEC that currently pumps around 3.2 million barrels per day.
Market participants focused on the risk that any escalation involving Iran could have far-reaching consequences for global energy flows, particularly if tensions spill over to neighboring countries or threaten critical shipping routes. Analysts warned that the greatest immediate risk would be any disruption to the Strait of Hormuz, one of the world’s most vital oil transit chokepoints, through which roughly 20 million barrels of oil pass each day.
John Evans, an analyst at PVM, said the market’s central concern is not just a direct hit to Iranian production, but the broader collateral damage that could follow. He noted that if Iran were to retaliate against regional neighbors or move to block the Strait of Hormuz, the impact on global oil supply would be severe and swift, triggering a sharp spike in prices.
By 1308 GMT, Brent crude futures were up $1.65, or 2.4%, at $70.05 a barrel. Earlier in the session, prices touched an intraday high of $70.35, the strongest level since late September. Brent is now on track to post a gain of more than 15% for January, marking its largest monthly increase in four years and underscoring how quickly sentiment has shifted in the oil market.
U.S. West Texas Intermediate crude also posted strong gains, rising $1.59, or 2.5%, to $64.80 a barrel. WTI briefly climbed above $65 a barrel earlier in the day, also reaching a four-month high. The U.S. benchmark is heading for a monthly gain of about 13%, its biggest since July 2023.
Tensions have intensified as U.S. President Donald Trump ramps up pressure on Tehran to halt its nuclear program. Recent developments have included threats of military action and the deployment of a U.S. naval group to the region, moves that have unsettled markets already sensitive to geopolitical risk.
Reports indicate that the White House is weighing a range of options, including targeted strikes on Iranian security forces or leadership figures, potentially aimed at emboldening domestic opposition and destabilizing the current leadership. The possibility of such actions has added a fresh geopolitical premium to oil prices.
Some analysts believe the market is already pricing in part of that risk. Analysts at Citi said the heightened threat surrounding Iran has added an estimated $3 to $4 per barrel to oil prices. They warned that further escalation could push Brent crude as high as $72 a barrel over the next three months if tensions continue to build or spill into direct conflict.
Beyond the Middle East, supply issues in other regions have also contributed to the tightening outlook. In Kazakhstan, operations at the massive Tengiz oilfield are being restarted gradually after electrical fires forced output cuts last week. Operators aim to restore full production within about a week, but the disruption has temporarily removed a significant volume of crude from the market.
In the United States, oil and gas producers have been bringing wells back online after Winter Storm Fern disrupted production over the weekend. While the weather-related outages are expected to be short-lived, they added to near-term supply constraints in the world’s largest oil-producing country and top exporter of liquefied natural gas.
UBS analyst Giovanni Staunovo said the combination of factors has made the oil market tighter than many had anticipated. He pointed to supply disruptions in Kazakhstan, including issues at the CPC terminal and the Tengiz field, alongside cold weather in the U.S. that temporarily curtailed crude production. Together, these developments have removed a meaningful number of barrels from the market at a time when geopolitical risks are already elevated.
With supply disruptions piling up and geopolitical tensions showing little sign of easing, traders remain on edge, bracing for further volatility as oil markets navigate an increasingly uncertain global landscape.