Oil prices have surged sharply this week, with Brent moving above USD 71 and WTI climbing past USD 66, its highest level since August. This rise does not reflect improving fundamentals, but rather the increasing incorporation of a geopolitical risk premium. Investors are rapidly reassessing the base-case scenario amid escalating tensions between the United States and Iran, which now dominate the entire energy news flow.
The U.S. administration has hardened its stance, demanding a new nuclear agreement with Iran within 10 to 15 days, under the threat of military action. Despite discussions in Geneva, signals from Washington — notably through Vice President J.D. Vance — suggest that Tehran is not meeting U.S. demands, reducing the likelihood of de-escalation. The market is therefore beginning to price in the possibility of a conflict, whether limited or prolonged.
The major risk concerns the Strait of Hormuz, a strategic chokepoint through which a critical share of global oil supply transits. Any disruption, even temporary, would trigger an immediate and potentially severe supply shock, impacting not only crude prices but also the broader energy logistics chain. Market participants fear a scenario in which infrastructure in the Persian Gulf is directly threatened, further amplifying volatility.
In the short term, the oil market remains entirely driven by geopolitics. Prices retain an upward bias as long as uncertainty persists, and any diplomatic development could spark abrupt moves. Over the medium term, the trajectory will depend on the ability of stakeholders to avoid direct confrontation and secure global energy flows. The risk/reward profile remains asymmetric, with supply shock risk clearly outweighing other considerations.