Oil prices rose for a third consecutive session on Thursday, gaining around 1.5%, as growing concerns that the United States could take military action against Iran heightened fears of supply disruptions in the Middle East.
Brent crude futures advanced 94 cents, or 1.4%, to $69.34 a barrel by 07:30 GMT, while U.S. West Texas Intermediate climbed 92 cents, or 1.5%, to $64.13 a barrel. Both benchmarks are now up roughly 5% since the start of the week and are trading at their highest levels since September 29.
The rally has been driven by increasing pressure from U.S. President Donald Trump on Iran to curb its nuclear programme, alongside renewed threats of military strikes and the arrival of U.S. naval forces in the region. Iran, the fourth-largest producer in OPEC with output of around 3.2 million barrels per day, is a key source of risk for global energy markets should tensions escalate.
According to Reuters, Trump is evaluating potential strikes against Iranian security forces and senior leadership in an effort to encourage unrest and potentially destabilise the current government, citing U.S. officials familiar with the discussions.
“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,” DBS Bank’s energy sector team lead Suvro Sarkar said in an email.
Beyond geopolitics, supply-side disruptions have also provided support. In Kazakhstan, output at the massive Tengiz oilfield is being brought back online in phases after electrical fires curtailed production last week, with full output expected within about a week. In the United States, the world’s largest oil producer and top exporter of liquefied natural gas, operators have been restarting crude and gas production following weather-related shutdowns caused by Winter Storm Fern.
Prices were further underpinned by an unexpected decline in U.S. crude inventories, which briefly eased concerns over excess supply, according to Phillip Nova senior market analyst Priyanka Sachdeva. The U.S. Energy Information Administration reported that crude stockpiles fell by 2.3 million barrels to 423.8 million barrels in the week ended January 23, versus expectations for a 1.8 million-barrel build in a Reuters poll.
Some analysts see further upside risks if tensions around Iran intensify.
“The potential for Iran getting hit has escalated the geopolitical premium of oil prices by potentially $3 to $4 (per barrel),” analysts at Citi said in a note on Wednesday. They added that further geopolitical escalation could push Brent prices as high as $72 a barrel over the next three months.
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