Oil soared as US–Iran tensions mount, as traders price in renewed supply risk

Oil posted its biggest gain since October, rising more than 4% on Wednesday as escalating tensions between the US and Iran and stalled diplomacy over the Ukraine conflict prompted traders to price in heightened supply risks.

Brent crude settled up $2.93, or 4.35%, at $70.35 a barrel, while US WTI gained $2.86, or 4.59%, to $65.19. Both benchmarks recorded their highest settlements since 30 January, rebounding from two-week lows in the previous session.

The advance was driven by reports that any potential US military action against Tehran could extend beyond a limited strike into a weeks-long campaign, with Israel said to favour a tougher approach. Meanwhile, talks between Ukraine and Russia in Geneva ended without a breakthrough, reinforcing broader geopolitical uncertainty.

Yet, most attention centred on the Strait of Hormuz, a key conduit for global crude flows, after Iranian state media reported temporary closures linked to military drills. Although no sustained disruption has materialised, the developments underscored the vulnerability of supply from the region.

Some analysts, however, cautioned that a sharp escalation may be constrained by US domestic politics. With mid-term elections approaching, President Donald Trump may be reluctant to risk a spike in fuel prices that could weigh on voters, tempering expectations of immediate military action even as risk premiums remain elevated.

Written by: Farid Muzaffar