Oil Prices Surge on US-Iran Tensions & Supply Risks

Oil prices climbed to their highest point in over a week, fueled by a combination of escalating geopolitical tensions in the Middle East and significant supply disruptions in Central Asia. Both Brent and West Texas Intermediate crude benchmarks surged as the United States intensified its stance against Iran while a major oilfield in Kazakhstan remained offline.

The renewed pressure from Washington on Tehran has sparked concerns about potential oil supply disruptions from a critical producing region.

US Escalates Pressure on Iran

President Donald Trump’s recent actions and statements have directly contributed to market anxiety. The U.S. administration is applying pressure through both economic sanctions and military posturing.

New Sanctions Target Iranian Oil Transport

The U.S. Treasury announced fresh sanctions targeting nine vessels and eight related firms involved in the transportation of Iranian oil and petroleum products. This move directly targets Iran's ability to export its crude, heightening concerns over global supply stability.

As OPEC's fourth-largest producer with an output of around 3.2 million barrels per day, any disruption to Iran's exports has significant implications for the global market, particularly for major importers like China.

Military "Armada" Heads to Middle East

Adding to market jitters, President Trump announced an "armada" was en route to the Middle East. A U.S. official confirmed that naval assets, including an aircraft carrier and guided-missile destroyers, are expected to arrive in the region within days. These deployments follow U.S. strikes conducted on Iran last June and renewed warnings to Tehran.

Kazakhstan Oil Outage Adds to Supply Woes

Compounding the geopolitical risks, the oil market is also contending with a major supply outage in Kazakhstan. Chevron confirmed that production at the Tengiz oilfield, one of the world's largest, has not yet resumed following a fire that prompted a shutdown on Monday.

This shutdown worsens existing challenges for Kazakhstan's oil sector, which has already faced export bottlenecks at its primary Black Sea gateway due to damage from Ukrainian drones.

According to an analysis from JP Morgan, the Tengiz field—which accounts for nearly half of the country's production—could stay offline for the rest of the month. The bank projects Kazakhstan’s crude output will likely average just 1 to 1.1 million barrels per day (bpd) in January, a steep drop from its typical level of around 1.8 million bpd.

How Oil Prices Responded to Market Pressures

The dual pressures from Iran and Kazakhstan sent key oil benchmarks soaring.

• Brent crude futures jumped by $1.93, a 3% increase, to settle at $65.99 a barrel.

• U.S. West Texas Intermediate (WTI) crude climbed $1.80, also up 3%, to $61.16 a barrel.

Both benchmarks hit their highest levels since January 14 and were on track to close the week with gains exceeding 2.5%.

The week's trading was volatile. Prices had initially dropped by approximately 2% on Thursday after President Trump backed away from tariff threats against Europe and ruled out military action. This followed earlier market movements related to U.S.-Denmark discussions, where Trump announced a deal allowing "total access" to Greenland.