Oil prices extend gains on concerns of potential US-Iran conflict

Oil prices climbed in Asian trade Thursday, with Brent futures rising to 70.59 a barrel—the highest settlement since late January. The rally is driven by a volatile mix of stalled diplomatic talks in Geneva and escalating military activity in the Persian Gulf.

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Investors are increasingly pricing in potential supply disruptions as both Washington and Tehran heighten their presence near the world’s most critical oil chokepoint. While the White House reported “a little bit of progress” in nuclear negotiations this week, the threat of armed conflict remains the primary driver for the market’s bullish sentiment.

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The $70 Threshold: Brent Reaches New Heights

Brent crude settled more than 4% higher on Wednesday, and the momentum carried into Thursday’s GMT trade. U.S. West Texas Intermediate (WTI) followed suit, gaining to 65.47. This surge comes as traders react to a surprise drop in U.S. crude and gasoline inventories, contradicting analyst expectations of a 2.1 million barrel build.

Meanwhile, the “Trump factor” is playing a cooling role on long-term speculation. Analysts at Nissan Securities suggest that the U.S. President is keen to avoid a sharp spike in energy prices, which could lead to limited, short-term air strikes rather than full-scale war. Therefore, the market is currently oscillating between “catastrophic risk” and “managed escalation.”

The Strait of Hormuz “Wait-and-See”

The main concern for global energy security remains the Strait of Hormuz. On Tuesday, Iranian state media reported a brief, few-hour shutdown of the waterway. Though it reportedly reopened, the incident served as a “shot across the bow” to global traders.

Next, Iran issued a Notice to Airmen (NOTAM) for rocket launches across its southern regions on Thursday (February 19). This window, spanning from 0330 GMT to 1330 GMT, coincided with the U.S. deploying additional warships to the Gulf. Vice President JD Vance stated that Washington is weighing whether to pursue “another option” if diplomatic engagement fails to yield details from Tehran in the next two weeks.

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Geopolitical Flares: From Geneva to Satellite Leaks

While the oil market is focused on the Gulf, satellite imagery has revealed a new concrete shield over a sensitive military site in Iran. Experts claim this advances work at a location reportedly bombed by Israel in 2024. Therefore, the threat of a three-way escalation between the U.S., Iran, and Israel is keeping the “fear premium” high.

Furthermore, the lack of a breakthrough in the Ukraine-Russia peace talks in Geneva on Wednesday added to the broader global uncertainty. President Zelenskiy’s accusations of Moscow stalling mediated efforts mean that the risk of energy weaponization remains a factor on both the Eastern European and Middle Eastern fronts.

Reality Check

Traders are bidding up prices on the back of the “NOTAM” and naval movements. Still, the global supply-demand balance remains relatively fragile. Therefore, if the rocket launches pass without incident and the Geneva talks resume in two weeks, the $70 Brent mark may prove to be a “speculative peak” rather than a new floor. In fact, if the EIA inventory report due later today shows a build contrary to API data, we could see a rapid reversal.

The Loopholes

The Iranian “shutdown” of the Strait on Tuesday remains shrouded in state media ambiguity. In fact, there were no verified reports from independent shipping trackers of a full maritime blockade. Therefore, this may have been a “rhetorical shutdown” designed to test market sensitivity and drive up prices before the Geneva recess. Still, the loophole of “unannounced rocket tests” allows Tehran to exert pressure without technically violating maritime laws.

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What This Means for You

If you are a consumer or business owner in India, realize that the retail fuel price relief seen last month is likely over. First, monitor the Official EIA report due tonight; it will determine if the $70 rally has staying power. Then, expect a surcharge on international shipping as insurance premiums for the Persian Gulf transit are revised upward following the NOTAM.

Finally, understand that the JD Vance comments suggest a deadline is looming. You should expect heightened volatility over the next 14 days as the market waits for Iran to return to the table with “more details.” Before the end of the week, check for any localized fuel price adjustments if your regional government passes on the global crude surge.

What’s Next

The Energy Information Administration (EIA) will release its official U.S. inventory report later today, February 19. Then, the market will monitor the conclusion of the Iranian rocket launch window at 1330 GMT. Finally, a new round of high-level diplomatic cables is expected by late next week as the U.S. clarifies its “other options.”

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