Oil Rises on US-Iran Tensions; Brent Moves Back Above $70

Oil futures rebounded strongly after a volatile start to February, as geopolitical tensions in the Middle East outweighed earlier pressure from inventory expectations and mixed macroeconomic signals.

In the first half of the month, both benchmarks struggled amid expectations of stock builds. However, sentiment shifted sharply this week as rising tensions between the United States and Iran revived concerns about potential supply disruptions in the Gulf.

On Wednesday, both benchmarks recorded their strongest daily gains since October. April Brent settled at $70.35/bbl, up $2.93 on the day, while March WTI (NYMEX) settled at $65.19/bbl, up $2.86, marking their highest settlements since January 30. At the time of writing, Brent was trading at $70.56/bbl, while WTI stood at $65.44/bbl.

Strait of Hormuz Risks Back in Focus

Gains extended during Asian trading on Thursday as markets evaluated the possibility of a US military operation against Iran, following reports that intervention could occur sooner than previously expected.

Brent remained above $70/bbl and WTI above $65/bbl, supported by fears that escalation could disrupt flows through the Strait of Hormuz, a key chokepoint handling roughly 20% of global oil consumption.

Although diplomatic contacts between Washington and Tehran continue in Geneva regarding Iran’s nuclear programme, progress has been limited. The White House noted “a little bit of progress,” but significant gaps remain, with Iran expected to submit a new proposal in the coming weeks.

Military signals intensified, with Iran issuing a notice to airmen (NOTAM) for planned rocket launches in its southern region, while the US deployed additional naval assets nearby. Reports also indicated that Israel is advocating a tougher stance.

Despite heightened rhetoric, some analysts believe a full-scale conflict remains unlikely, keeping markets in a cautious wait-and-see mode.

Inventory Data Adds Support

According to the American Petroleum Institute (API), US crude inventories fell by 609,000 barrels last week, defying expectations of a 2.1 million-barrel build. Gasoline and distillate stocks also declined.

The unexpected draw supported bullish sentiment ahead of official Energy Information Administration (EIA) data.

Broader Macro Factors in Play

Elsewhere, peace talks between Ukraine and Russia ended without a breakthrough. Russia, an OPEC+ member, has reportedly experienced a slowdown in drilling activity, potentially affecting future output.

While geopolitical risks are currently driving price movements, traders are also mindful of political considerations in Washington. A prolonged conflict that lifts gasoline prices could carry domestic implications ahead of US mid-term elections.

For now, the market appears to be factoring in an elevated risk premium rather than a full-scale supply disruption, leaving crude futures highly sensitive to diplomatic and military developments.

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