Oil Prices Edge Higher as Middle East Tensions Simmer, Supply Risks Loom
Oil prices posted modest gains in Friday's trading session, with geopolitical tensions surrounding Iran and continued disruptions to Russian exports providing a floor under the market. The March West Texas Intermediate (WTI) crude contract (CLH26) rose 0.69% to settle at $65.78 a barrel, while March RBOB gasoline (RBH26) climbed 1.00%.
The market's focus remains fixed on the Middle East, where rhetoric between Washington and Tehran continues to fuel uncertainty. Earlier this week, prices surged to multi-month highs after stark warnings from the U.S. administration. While the tone has softened slightly, with President Trump indicating overnight discussions were held and expected to continue, the underlying risk of a confrontation that could disrupt flows from OPEC's fourth-largest producer continues to underpin prices. Analysts note that any military action could potentially threaten the Strait of Hormuz, a critical chokepoint for roughly 20% of the world's seaborne oil.
"The market is walking a tightrope," said Marcus Thorne, an energy strategist at Global Insights Group. "On one side, you have significant geopolitical premiums baked in due to Iran and the Russia-Ukraine war. On the other, a resilient U.S. dollar and the prospect of a sustained global surplus are acting as a counterweight, preventing a runaway rally."
Beyond the Middle East, the outlook for Russian oil supplies remains constrained. The Kremlin recently dampened hopes for a near-term peace deal with Ukraine, ensuring Western sanctions and Ukrainian drone attacks on refineries and tankers will continue to limit export volumes. Meanwhile, the OPEC+ alliance is expected to maintain its current production restraint at its upcoming meeting, a strategy aimed at managing the emerging global surplus.
Recent data paints a mixed picture. The International Energy Agency (IEA) slightly trimmed its forecast for a 2026 crude surplus, while U.S. production has dipped modestly from its record high last November. U.S. crude inventories remain below the five-year average, indicating relatively tight immediate supply, though product stocks are healthier.
Reader Reactions:
David Chen, Portfolio Manager: "This is a classic risk-on, risk-off trade dictated by headlines. The fundamentals—like the OPEC+ surplus management and solid non-OPEC supply—suggest a ceiling on prices. But the floor is being set in the Middle East. Traders are hedging against a low-probability, high-impact event."
Sarah Jenkins, Policy Analyst: "The volatility is exhausting for consumers and businesses trying to plan. Every tweet or statement sends ripples through the market. It underscores our failed energy transition policy—we remain dangerously hostage to fossil fuels and the autocrats who control them."
Rajiv Mehta, Shipping Logistics Director: "The attacks on tankers in the Baltic and the constant threat to Hormuz are our operational nightmare. Insurance premiums are skyrocketing, and rerouting options are limited. This geopolitical tax is eventually paid by everyone at the pump."
Anya Petrova, Independent Commodity Trader: "It's all noise until we see barrels actually taken offline. The market has absorbed the loss of Russian crude and kept going. Unless there's a major, sustained supply outage, these price spikes are for day-traders, not long-term investors."