Oil prices rose as markets tracked the risk of US military action against Iran and possible disruption to Persian Gulf supply. ICE Brent gained 4.35% and settled above $70 per barrel, with strength continuing in early trading.
Iran exports about 1.5m barrels a day of crude oil, while total oil flows through the Strait of Hormuz are around 20m barrels a day, including refined products. Tighter shipping through the Strait could affect both crude and product movements.
Brent Curve Signals Tight Supply
The ICE Brent forward curve remains in backwardation through 2026 and 2027, extending into early 2028. This pricing structure points to a tighter market than many forecasts suggest.
A balance sheet view shows a surplus through the first half of the year, which would usually weigh on near-term prices. Sanctions on parts of supply, plus reduced buying of sanctioned barrels such as Russian oil by Indian refiners, may be tightening physical conditions compared with headline balances.
Oil prices are climbing due to increasing concerns about potential US action against Iran, pushing the market into a state of high alert. With ICE Brent now testing $75 a barrel, a level we last saw in late 2025, the recent positioning of the US 5th Fleet near the region is making traders nervous. This military build-up makes a diplomatic de-escalation seem less likely in the immediate future.
The primary risk for oil markets is the potential disruption to the Strait of Hormuz, a chokepoint through which roughly 21 million barrels of oil transit daily. Any conflict could jeopardize not only this massive volume but also Iran’s own crude exports, which currently stand at about 1.5 million barrels per day. This makes any headlines about military movements in the Persian Gulf a critical driver for short-term price volatility.
Geopolitical Risk Concentrates In Hormuz
The structure of the Brent forward curve confirms this tight market, as it remains in backwardation through the end of 2027. This indicates that the demand for immediate delivery is significantly higher than for future delivery, a classic sign of a supply squeeze. While front-month prices are reacting to geopolitical news, the backwardation further out on the curve suggests a more persistent, underlying tightness.
Our own balance sheets may indicate a surplus, but this view is misleading because it doesn’t fully capture the impact of sanctions. For instance, we observed a clear trend in late 2025 where major buyers, such as Indian refiners, became more reluctant to purchase Russian crude due to sanctions and payment issues. This effectively removes barrels from the accessible market, making physical supply much scarcer than paper figures suggest.
