WTI slipped to around $66.40 a barrel in Asian trading on Friday, after rising for two straight sessions. It eased from an earlier six-month high of $66.82.
The pullback came as the market weighed possible supply risks tied to the US and Iran. President Donald Trump warned Iran to reach an agreement or face military action. 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 considering a possible military operation in the Middle East, while Israel continued to call for regime change in Tehran. The UN nuclear watchdog said the window for diplomacy is closing, as the US builds up its military presence.
Any escalation could disrupt shipping through the Strait of Hormuz, which carries about 20% of global oil shipments. Estimates put the current risk premium in crude at roughly $7–$10 per barrel.
US supply data also influenced prices. EIA figures showed crude stocks fell by 9.014M barrels last week, versus forecasts for a 2.1M-barrel build, after the prior week’s 8.53M increase.
Last year, oil prices surged on sharp US-Iran tensions and an unexpectedly large drop in US crude inventories. At the time, a geopolitical risk premium of about $7–$10 per barrel helped keep prices above $65. That premium later faded as diplomatic progress steadied relations in late 2025.
Market Setup Heading Into March 2026
Conditions look very different heading into March 2026. This week’s EIA report showed an unexpected inventory build of 3.5 million barrels. That’s a clear contrast to the roughly 9 million barrel draw seen in a similar report last year. The shift suggests supply is now running ahead of demand. That view is also reflected in WTI struggling to hold $78, after a recent OPEC+ meeting failed to deliver deeper production cuts.
With the market moving from supply fears to demand worries, near-term upside looks limited. We believe traders should consider the chance of flat or lower prices in the weeks ahead. Strategies such as buying puts or using bear call spreads on WTI futures may offer attractive risk-reward in this setup.
Adding to the cautious tone, the International Energy Agency cut its 2026 global demand growth forecast by 200,000 barrels per day, citing weak economic data from Europe. In the past, when a major geopolitical risk fades, implied volatility often declines. Because of that, selling options premium may also be attractive if prices start to settle into a new, lower range.
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