Oil markets are witnessing their strongest start to the year since 2022, as traders rush to hedge against potential supply shocks amid escalating geopolitical risks linked to Iran.
Trading activity has surged across futures and options markets as investors position themselves against the possibility of military action involving the United States and Donald Trump.
Brent crude prices briefly climbed above $72 per barrel on Friday, reaching seven-month highs as supply disruptions and political tensions pushed risk premiums higher. Some analysts estimate that geopolitical uncertainty could add as much as $10 per barrel in speculative risk pricing.
Latest Oil Prices:
WTI Crude • 66.48 +0.08 +0.12%
Brent Crude • 71.76 +0.10 +0.14%
Murban Crude • 72.06 -0.02 -0.03%
Louisiana Light • 67.58 +3.00 +4.65%
Bonny Light • 78.62 -2.30 -2.84%
Opec Basket • 69.79 +3.17 +4.76%
Mars US • 841 days 69.53 -0.85 -1.21%
Gasoline • 1.997 -0.009 -0.46%
Natural Gas • 3.047 +0.051 +1.70%
The rally marks a significant reversal from expectations only weeks earlier, when many traders were preparing for a potential global supply surplus.
Instead, unexpected disruptions in production from the United States and Kazakhstan have tightened physical supply conditions. At the same time, sanctions-related avoidance of certain crude shipments has further constrained market flows.
The geopolitical backdrop has intensified concerns ranging from Venezuela to Iran, where investors are closely monitoring the possibility of renewed US military action.
Washington has reportedly considered limited strike options, including scenarios involving the region that accounts for roughly a quarter of the world’s seaborne oil trade.
Veteran energy adviser Gary Ross, who now manages hedge fund investments at Black Gold Investors, said geopolitical risk has become the dominant driver in oil markets.
“The market is pricing in potential conflict,” Ross said. “This is a much tighter market than many traders expected. I would avoid holding short positions in this environment.”
US officials have indicated that Washington is evaluating targeted strike options, while reports from Axios suggested that an American attack on Iran could occur sooner than previously anticipated.
Open interest in Brent crude futures has reached a record level this year, reflecting growing demand for risk protection.
Volatility indexes have surged to the highest levels since the last US strike on Iran, while options contracts have been heavily used for long-term upside protection, a trend not seen in years.
Despite the geopolitical tension, oil prices have not surged to extreme levels due to continued expansion in global production.
US Energy Secretary Chris Wright said American dominance in energy production has reduced the country’s vulnerability to supply shocks and their impact on foreign policy.
Members of the OPEC+ have gradually increased output over the past year, while non-OPEC production also reached record levels. Global production climbed to about 108 million barrels per day by late 2025, roughly 3 million barrels above consumption levels, according to the International Energy Agency.
Unexpected outages have quickly eroded western inventories in recent weeks.
Kazakhstan’s CPC Blend exports fell to their lowest level in nearly a decade following a combination of drone attacks, maintenance issues, storm damage and production disruptions.
Meanwhile, severe cold weather in the United States contributed to two of the four largest US crude inventory declines this century, with stocks dropping by nine million barrels in a single week.
Market participants are paying particular attention to developments surrounding Iran and maritime transport through the Strait of Hormuz, a strategic chokepoint through which about one-fifth of global oil supplies pass.
Some Asian refineries have already begun searching for crude cargoes from outside the Gulf region as a precautionary hedge against potential supply disruptions.
Freight rates for very large crude carriers have also jumped, with top-tier tankers earning more than $150,000 per day, the highest level since the pandemic period when vessels were used for floating storage.
Follow the latest news on Google News
