WTI rose for a third straight session and traded near $64.20 a barrel in early European trading on Tuesday. Prices found support from rising tensions between the US and Iran. Traders are also waiting for the API weekly inventory report due later today.
The US warned American-flagged vessels to avoid Iranian waters when passing through the Strait of Hormuz. Both the US and Iran said talks would continue after discussions in Oman last Friday.
Us Iran Tensions Support Prices
Iran held to its position on uranium enrichment, which remains a key dispute with Washington. Ongoing diplomatic efforts could limit any further rise in crude prices.
Supply factors also weighed on the outlook. Venezuelan exports rose to 800,000 bpd in January from 498,000 bpd in December, according to Reuters. Higher exports could add to global supply.
Markets also watched India’s imports of Russian oil during US–India trade talks. Reports of a freeze on Russian crude purchases could change flows from one of the largest buyers of Russian oil and affect global prices.
The market looks very different today than it did at this time last year, when WTI traded near $64 per barrel. Since then, traders have priced in a large geopolitical risk premium. Crude is now holding above $78. This suggests that concerns about US-Iran tensions from early 2025 have not eased and may have intensified.
Volatility And Risk Premiums
In 2025, the Oman-hosted talks failed to produce a lasting deal. Since then, there have been several minor clashes in the Strait of Hormuz. This has kept volatility high, and traders should expect it to stay elevated. War risk premiums for tankers passing through the Strait have risen by 40% since the fourth quarter of 2025. This added cost is helping support higher prices.
In addition, the supply headwinds expected in 2025 never fully appeared. Venezuelan exports briefly reached 800,000 bpd, but have since dropped. Recent EIA data shows output has struggled to stay above 750,000 bpd due to infrastructure problems. For now, that potential source of extra supply has faded.
Concerns about India’s imports of Russian crude also proved valid and added another bullish driver. After diplomatic pressure, Indian refiners cut Russian oil intake by nearly 300,000 bpd in the final quarter of 2025. This forced a major buyer to seek barrels elsewhere, tightening the global market.
Over the coming weeks, options traders may want strategies that benefit from continued volatility, such as long straddles. While the trend is upward, a surprise diplomatic breakthrough could trigger a sharp pullback. Implied volatility on front-month WTI options is now near 35%, up from the low 20s seen through much of 2023 and 2024.
Demand also matters, especially from China. Recent data has been mixed. China’s latest Caixin Manufacturing PMI was 50.8, showing only slight growth. This softer demand picture could cap prices, meaning far out-of-the-money call options may carry more risk than reward.
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