Light crude oil futures are extending their gains this week, up 5.70% and threatening to break out to the upside as U.S.-Iran tensions continue to escalate.
The market has rallied more than 20% from its December lows, and the big question now is how much further it can go given that the world remains well-supplied with oil.
Wednesday’s 4% Jump Was Just the Beginning
Wednesday’s 4% single-session surge set the tone for the week. It was a direct reaction to the military buildup in the Middle East and the growing fear that the U.S. is preparing to strike Iran. Brent crude is now trading at its highest level since late July, while WTI is on track for its highest close since August 1. President Trump said Thursday that he will decide whether to launch military strikes against Iran within the next 10 days. “So now we may have to take it a step further, or we may not,” Trump said at the inaugural meeting of his Board of Peace. “Maybe we’re going to make a deal. You’re going to be finding out over the next probably 10 days.” That uncertainty alone is enough to keep traders on edge and speculators adding to long positions.
The Strait of Hormuz Remains the Central Risk
The main concern for the crude oil market is that military activity will lead to a supply disruption if Iran decides to block shipping in the Strait of Hormuz. About 20% of the world’s oil consumption passes through that waterway. Iran’s Revolutionary Guard conducted military exercises in the strait.
