Oil prices rose as markets watched the risk of US military action against Iran and a possible disruption to Persian Gulf supply. ICE Brent gained 4.35% and settled above $70 a barrel, with strength continuing in early trading.
Iran exports about 1.5m barrels a day of crude oil. Total oil flows through the Strait of Hormuz are around 20m barrels a day, including refined products. If shipping tightens through the Strait, it could disrupt both crude and product movements.
Brent Curve Signals Tight Supply
The ICE Brent forward curve remains in backwardation through 2026 and 2027, and extends into early 2028. This pricing structure suggests a tighter market than many forecasts imply.
A balance-sheet view shows a surplus in the first half of the year, which would normally pressure near-term prices. But sanctions on parts of supply, along with reduced buying of sanctioned barrels (such as Russian oil) by Indian refiners, may be tightening physical supply more than headline balances show.
Oil prices are rising as concern grows about possible US action against Iran, keeping the market on high alert. ICE Brent is now testing $75 a barrel, a level last seen in late 2025. Reports of the US 5th Fleet positioning near the region are also adding to trader anxiety. This military build-up makes a quick diplomatic de-escalation look less likely.
The biggest risk for oil markets is disruption to the Strait of Hormuz, a chokepoint where roughly 21 million barrels of oil move each day. Any conflict could threaten that flow and Iran’s own crude exports, currently around 1.5 million barrels per day. As a result, headlines about military activity in the Persian Gulf are likely to drive short-term price swings.
Geopolitical Risk Concentrates In Hormuz
The Brent forward curve supports the view of a tight market, staying in backwardation through the end of 2027. This means buyers are paying more for oil delivered now than for oil delivered later—often a sign that near-term supply is strained. While front-month prices are reacting to geopolitical news, the backwardation further out suggests the tightness may be more persistent.
Our balance sheets may show a surplus, but this can be misleading because they do not fully reflect the impact of sanctions. In late 2025, for example, we saw major buyers such as Indian refiners become more hesitant to buy Russian crude due to sanctions and payment hurdles. That reduces the volume of oil that is truly available to the market, making physical supply tighter than the paper numbers suggest.
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