London: Brent crude oil futures prices experienced a significant surge on Thursday, climbing to their highest level in nearly six months. This sharp increase was primarily fueled by growing market anxieties over the possibility of a US military attack on Iran, a key member of the Organization of the Petroleum Exporting Countries (OPEC).
Geopolitical Tensions Drive Market Volatility
Iran, recognized as OPEC's fourth-largest producer with a daily output of approximately 3.2 million barrels, finds itself at the center of escalating geopolitical concerns. Analysts highlight that the immediate worry for global oil markets extends beyond a direct conflict to potential collateral damage. Specifically, there are fears that Iran might retaliate by targeting neighboring countries or, more critically, by closing the strategic Strait of Hormuz.
Analyst Insights on Market Risks
PVM analyst John Evans emphasized the gravity of the situation, stating, "The immediate concern is the collateral damage done if Iran takes a swing at its neighbours or possibly even more tellingly, it closes the Strait of Hormuz to the 20 million barrels per day of oil that navigates it." This vital waterway is a crucial transit route for a substantial portion of the world's oil supply, and any disruption could have severe implications for global energy markets.
Price Movements and Market Performance
On Thursday, Brent crude futures demonstrated robust gains, rising by $2.6, which translates to a 3.8% increase, to settle at $71 per barrel. This price point marks the highest level observed since August 1 of the previous year. Furthermore, the Brent contract is poised to achieve an impressive monthly gain of over 16% for January, representing its most significant monthly increase in four years.
US Crude Also Shows Strong Gains
In parallel, US West Texas Intermediate (WTI) crude futures also recorded substantial growth. WTI prices increased by $2.5, or 4%, reaching $65.8 per barrel. Earlier in the trading session, WTI futures touched $65.8 per barrel, establishing a four-month high. This performance positions WTI for a monthly gain of approximately 14%, which would be its largest monthly increase since July 2023.
Background: Escalating US-Iran Tensions
The surge in oil prices coincides with heightened diplomatic and military pressures. US President Donald Trump has intensified efforts to compel Tehran to abandon its nuclear program, contributing to the current climate of uncertainty and risk in the region. These developments have directly influenced investor sentiment, leading to increased volatility and upward pressure on crude oil prices across global markets.
