Oil prices rise as tensions with Iran fuel fears of supply disruptions

Highlights

Brent rises 1.29%, WTI gains 0.79%.
Israel and Iran tensions threaten oil supplies.
Higher OPEC+ output limits oil price gains.

January Brent crude futures climbed 1.29%, to $93.96 a barrel, while December West Texas Intermediate futures gained 0.79%, to $87.21. According to Reuters, security threats in the Strait of Hormuz and tensions involving Iran remained key concerns for the global oil market.

Strait of Hormuz disruptions support oil prices

Security risks in the Strait of Hormuz intensified after two oil supertankers were disabled by explosions on Wednesday night. Iran's Revolutionary Guards Navy said the vessels had struck naval mines after disregarding warnings about an unauthorized shipping route.

The incident added to a series of disruptions affecting one of the world's most important oil transportation corridors. Tanker fires, reported oil spills and attacks on regional infrastructure have raised concerns about the reliability of crude shipments, even as producers seek to maintain output.

Tensions also increased after Israeli media reported that the country's security cabinet had instructed the military to strengthen preparations for possible strikes against Iran. Tehran warned that further U.S. military action could trigger attacks against military facilities beyond the Middle East.

Rising OPEC+ production limits gains

Higher crude output has prevented geopolitical risks from driving a more sustained rally. OPEC+ production increased in October, supported by additional Saudi Arabian supply despite shipping disruptions around the Persian Gulf.

Diplomatic developments have added uncertainty. Russian and Ukrainian negotiators agreed to a major prisoner exchange following talks in Abu Dhabi, although significant disagreements remain over territorial issues. Meanwhile, Washington and Tehran remain divided over nuclear conditions for a potential settlement.

The competing developments have left traders assessing whether diplomatic progress can reduce supply risks or whether further attacks could disrupt physical oil deliveries.

Supply risks remain central to the oil outlook

The immediate direction of oil prices will depend on whether disruptions in the Strait of Hormuz worsen and how quickly additional production reaches international markets. Any prolonged interruption to tanker traffic could increase transportation costs and tighten supplies, particularly for Asian refiners that depend on Middle Eastern crude.

Traders are also awaiting U.S. Energy Information Administration data on crude and petroleum product inventories, delayed by a national holiday. The figures could provide a clearer picture of American demand and help determine whether geopolitical concerns continue to outweigh pressure from higher global production.

We also reported gold prices fall for third straight day as dollar and Treasury yields rise.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.