Oil prices surged to their strongest one-day gain in months before stabilising, as mounting tensions between the US and Iran rattled energy markets and revived fears of supply disruptions from the Middle East, a region that pumps roughly one-third of the world’s crude.
Brent crude climbed 4.3 per cent in the previous session — its biggest single-day gain since October — to hold above $70 a barrel, while West Texas Intermediate (WTI) traded above $65. The rally followed reports that Washington could be preparing for possible military intervention in Iran sooner than markets had anticipated, with diplomatic negotiations over Tehran’s nuclear programme yielding limited progress.
Traders reacted swiftly to headlines suggesting that any US military action could evolve into a prolonged campaign. Regional instability carries enormous implications for oil supply, particularly given the strategic importance of the Strait of Hormuz, through which nearly 20 per cent of global petroleum liquids consumption flows daily, according to the US Energy Information Administration. Even the perception of heightened risk in the Gulf tends to inject a geopolitical premium into prices.
Ipek Ozkardeskaya, senior analyst at Swissquote, said crude rebounded sharply as talks between Russia and Ukraine faltered and US–Iran negotiations failed to eliminate the threat of broader military confrontation. “It’s extremely hard to tell what’s next,” she said. “If Middle East tensions ease thanks to fruitful nuclear talks between the US and Iran, oil should give back its gains at current levels. If, however, the threat of war rises — a scenario that would seriously shake the Middle East — we could see the price spike turn into a persistent medium-term positive trend. In that case, US crude could reasonably reach $80 per barrel.”
Market participants are weighing not only the risk of direct supply losses from Iran — which produces around 3 million barrels per day — but also the potential for disruptions across neighbouring producers if the conflict escalates. Iran is a member of Opec, and any significant outage could tighten global balances at a time when inventories in several key consuming nations remain below historical averages.
Helima Croft, head of global commodity strategy at RBC Capital Markets, warned that unresolved core disagreements between Washington and Tehran continue to raise the probability of renewed military confrontation. In a recent research note, she highlighted that the market is underestimating the risk of a sudden escalation that could threaten shipping lanes or energy infrastructure.
Adding to the bullish sentiment, US crude inventories fell by 609,000 barrels last week, according to data from the American Petroleum Institute, signalling resilient demand at the start of the summer driving season. Official government figures are expected to confirm whether stockpiles are continuing to tighten. Gasoline consumption typically rises during the US summer, amplifying the sensitivity of retail fuel prices to crude movements — a politically delicate issue ahead of US mid-term elections.
Ole Hansen, head of commodity strategy at Saxo Bank, said the market is once again trading geopolitics rather than fundamentals alone. “While global supply remains broadly adequate, traders cannot ignore the concentration risk in the Middle East,” he noted. “Any escalation that threatens exports through the Strait of Hormuz would likely trigger a sharp spike, potentially well beyond current levels.”
Meanwhile, Russia — a key member of Opec+ — is facing a slowdown in drilling activity, raising concerns that its output could gradually decline if investment remains constrained. The breakdown of recent peace talks over Ukraine has further darkened the geopolitical backdrop, reinforcing risk premiums across energy markets.
Despite the rally, analysts caution that volatility will likely remain elevated. Diplomatic channels between Washington and Tehran are still technically open, with Iranian officials indicating a “general agreement” on a negotiation framework and US officials expecting revised proposals in coming weeks. A breakthrough could quickly unwind the recent gains.
For now, analysts say the oil market is firmly in risk-on mode. With Brent back above $70 and WTI eyeing the mid-$70s, traders are bracing for headline-driven swings. “If tensions deepen or spill over into broader regional instability, the current spike could mark the beginning of a sustained upward trend — potentially testing $80 per barrel or higher in the weeks ahead.”
