Oil Prices Climb Toward Weekly Gain as U.S.–Iran Tensions Stir Supply Fears

BY COMFORT OGBONNA

Oil prices advanced on Friday, putting the market on course for its first weekly gain in three weeks, as rising geopolitical tensions between the United States and Iran reignited concerns over potential supply disruptions in the Middle East. Investors reacted after Washington warned Tehran that it would face serious consequences if it failed to reach an agreement on its nuclear programme within days.

International benchmark Brent crude futures rose 33 cents, or 0.5%, to $71.99 per barrel. Meanwhile, U.S. West Texas Intermediate crude climbed 62 cents, or 0.9%, to $67.05 per barrel as of 0715 GMT. The upward movement reflects renewed anxiety in global energy markets, where traders are closely watching diplomatic developments between the two long-standing rivals.

The tension escalated after U.S. President Donald Trump stated that “really bad things” would occur if Iran did not agree to terms regarding its nuclear activities. Trump set a deadline of between 10 and 15 days for a deal to be reached. While Iran insists its nuclear programme is intended for peaceful purposes, U.S. officials argue it carries potential military dimensions. The hardening rhetoric has raised fears that negotiations could collapse entirely, increasing the risk of confrontation.

Adding to market unease, Iran reportedly planned joint naval exercises with Russia shortly after conducting military drills that temporarily closed the strategically vital Strait of Hormuz. The narrow waterway, which lies between Iran and the oil-rich Arabian Peninsula, is one of the most critical oil transit chokepoints in the world. Approximately 20% of global oil supply passes through the Strait of Hormuz, making it highly sensitive to any military escalation or disruption.

Analysts say even the perception of risk in the region is enough to lift prices. Any interruption to shipments through the strait would significantly constrain global supply, tightening markets that are already balancing concerns over demand and output levels. Traders are therefore building in a geopolitical risk premium as diplomatic tensions intensify.

Further supporting prices were fresh signs of tightening supplies in key producing nations. Data from the U.S. Energy Information Administration showed that U.S. crude inventories fell sharply by 9 million barrels in the latest reporting week. The decline was driven by higher refinery utilisation rates and a rebound in exports, both of which indicate strong throughput and overseas demand for American crude.

However, gains were tempered by ongoing uncertainty about U.S. monetary policy. Minutes from the Federal Reserve’s latest meeting suggested policymakers are not in a hurry to cut interest rates and may even consider further hikes if inflation remains persistent. Higher interest rates can slow economic growth and dampen fuel demand, particularly in the United States, the world’s largest oil consumer. As a result, expectations of tighter financial conditions could limit the upside for crude prices.

Market participants are also weighing the prospect of increased supply from the OPEC+ alliance. Discussions have reportedly centered on the possibility of resuming output increases from April, a move that could add more barrels to the market. The alliance has previously implemented production cuts to stabilize prices amid concerns about oversupply.

According to analysts at JPMorgan, including Natasha Kaneva and Lyuba Savinova, the oil surplus that became evident in the second half of 2025 continued into January and is likely to persist. Their projections indicate sizable surpluses later this year, suggesting that further production cuts—potentially around 2 million barrels per day—may be necessary to prevent excessive inventory builds by 2027.

For now, the oil market remains caught between geopolitical risk and supply-demand fundamentals. While tensions in the Middle East are providing near-term support, broader concerns about global growth, interest rates, and potential output increases could determine whether the current rally has staying power.