Oil prices recorded their largest daily gain since October, driven by concerns over a potential new conflict between the United States and Iran. Brent crude surpassed US$71 per barrel after a 4.3% rise, while West Texas Intermediate traded above US$66. Analysts warn that the US military buildup in the region could close the window for a diplomatic agreement.
The oil market saw a sharp rebound on Wednesday, with Brent crude reaching over US$71 per barrel after a 4.3% increase, and West Texas Intermediate surpassing US$66. This rise, the largest since October, stems from fears that the United States and Iran are nearing a new clash in the Middle East.
Axios reported that a US military operation in the area could start soon, with Israel's government pushing for regime change in the Islamic Republic. The head of the UN nuclear watchdog stated that the US military deployment risks closing Iran's window for a diplomatic deal on its atomic activities. The agency has discussed concrete proposals with Tehran to inspect sites bombed last year by Israel and the US.
A war in the region would threaten supplies, as it produces about a third of the world's oil. President Donald Trump faces the challenge of potential gasoline price hikes ahead of midterm elections, which could upset voters.
Analysts at RBC Capital Markets, including Helima Croft, noted in a report: “The lack of resolution on core areas of dispute continues to tilt the balance toward another military confrontation.” They added: “The massive buildup of US military assets in the region, as well as Iran's recent naval exercise in the Strait of Hormuz, appear to indicate that the sequence for initiating a second military conflict has begun.”
Talks remain inconclusive: Tehran claims to have reached a “general agreement” with Washington on a possible nuclear pact, but a US official said Iranian negotiators will return to Geneva with a new proposal in two weeks. Additionally, the US announced visa restrictions on Iranian officials and executives over a recent crackdown on protests.
In the options market, bullish bets highlight the risk, with call options on Brent at US$100 for June equivalent to 10 million barrels traded on Wednesday.
