WTI eased to about $66.40 a barrel in Asian trading on Friday, after two straight sessions of gains. It pulled back from an earlier six-month high of $66.82.
The move followed tension over possible supply risks linked to the US and Iran. President Donald Trump warned Iran to reach an agreement or face military action, while Iran told the UN Secretary-General it does not seek conflict but will respond to any attack.
Rising Tensions And Supply Risk
Reports said US officials were weighing a possible military operation in the Middle East, as Israel continued to call for regime change in Tehran. The UN nuclear watchdog said time for a diplomatic outcome is narrowing, amid a US military build-up.
Any escalation could disrupt shipping through the Strait of Hormuz, which handles about 20% of global oil shipments. Estimates put the current risk premium in crude at around $7–$10 per barrel.
US supply data also moved prices. EIA figures showed crude oil stocks fell by 9.014M barrels last week, versus forecasts for a 2.1M-barrel build, after the prior week’s 8.53M increase.
Looking back to last year, we saw oil prices spike due to significant US-Iran tensions and a surprisingly large drop in US crude inventories. That period was defined by a geopolitical risk premium of around $7-$10 per barrel, which supported prices above $65. However, that premium has since evaporated as diplomatic channels stabilized relations in late 2025.
Market Setup Heading Into March 2026
The market landscape is now vastly different as we head into March 2026. This week’s EIA report showed an unexpected inventory build of 3.5 million barrels, a stark reversal from the massive 9 million barrel draw we saw in a similar report last year. This suggests that supply is now outpacing demand, a view supported by WTI crude currently struggling to hold the $78 level after a recent OPEC+ meeting failed to deliver deeper production cuts.
Given this shift from supply fears to demand concerns, upside momentum appears limited in the near term. We believe traders should consider positioning for sideways or downward price action over the coming weeks. Strategies like buying puts or establishing bear call spreads on WTI futures could offer favorable risk-reward profiles in this environment.
Further supporting this cautious outlook, the International Energy Agency just revised its 2026 global demand growth forecast down by 200,000 barrels per day, citing sluggish economic data from Europe. Historically, periods following the removal of a major geopolitical threat often see a drop in implied volatility. Therefore, we also see an opportunity in selling options premium if prices begin to consolidate in a new, lower range.
