The biggest driver this week has been a sharp escalation in U.S.–Iran tensions, injecting a sizeable risk premium into both benchmarks.
Reports that President Trump is considering targeted strikes on Iranian leadership have pushed Brent to around $70.70 and WTI to the mid-$60s—the highest levels since mid-2025.
Trump warned Tehran it faces military force unless it accepts a new nuclear deal, with talk of a “massive armada” headed toward the region.
The U.S. has reinforced its naval presence with an additional guided-missile destroyer, bringing the deployment to an aircraft carrier plus multiple destroyers and littoral combat ships. Iran has announced live-fire drills in the Strait of Hormuz next week—the chokepoint that carries roughly 20% of global seaborne oil trade.
For traders, the math is straightforward: the probability of disruption to Persian Gulf exports has risen, even though no barrels have actually been lost yet. That’s enough to lift prompt prices, steepen backwardation and pull the complex higher.
U.S. Inventories Show Real Tightening
The geopolitical story sits on top of a supportive U.S. inventory backdrop. The latest EIA report showed a 2.3 million barrel draw in commercial crude stocks for the week ending January 23, versus consensus expecting only a modest decline. At 423.8 million barrels, U.S. crude inventories are now about 3% below the five-year seasonal average.
