Oil prices have surged to their highest levels since late September 2025, climbing sharply to US$71.50 per barrel overnight as markets brace for the possibility of a US military strike on Iran.
Analysts say the fast-paced rally reflects renewed fears of geopolitical disruption in the Middle East, a region critical to global oil supply.
According to Rystad Energy’s latest market update, traders are rapidly repricing risk as the probability of US military action grows.
Jorge Leon, senior vice president and head of geopolitical analysis at the consultancy, said: “Oil markets are rapidly repricing geopolitical risk as the probability of direct US action against Iran rises.
“The speed of the oil price reaction suggests markets see US military action against Iran as a real, near-term risk.
“While weather disruptions play a role, the magnitude of the price move points to a renewed geopolitical risk premium.”
The sharp move in prices comes against the backdrop of escalating rhetoric from Washington.
US President Donald Trump said on 28 January that a US naval armada, led by the USS Abraham Lincoln, which arrived in the region days earlier, was ready to carry out its mission “with speed and violence, if necessary”.
The President also warned that time was running out for Tehran to agree to a new nuclear deal.
Market observers note that Trump’s warnings carry added weight given the administration’s recent record of turning threats into direct military action.
In June 2025, the US launched strikes on Iranian nuclear and military targets, marking an unprecedented step for a modern US government.
Similar actions followed in December, when Washington targeted ISIS positions in Nigeria after accusing the group of orchestrating systematic attacks on Christians.
And more recently, after sustained pressure, Venezuelan President Nicolás Maduro was captured and extradited to the US.
Internally, Iran’s leadership has regained some stability in recent weeks.
Domestic protests that had gripped major cities since late last year have been largely suppressed following a heavy government crackdown, reducing internal pressure but bolstering Tehran’s defiant posture toward Washington.
For traders, the current environment recalls the weeks leading up to the 12-day conflict last year, when US and Israeli forces clashed with Iran.
In the two days before that strike, oil prices rose by nearly US$3.70 per barrel as markets braced for escalation.
The present rally, up US$4.30 per barrel since rumours of renewed US action began circulating, suggests a similar or stronger risk assessment this time.
Not all of the price momentum is rooted in geopolitics, however.
A cold snap across the US has temporarily disrupted production and logistics in key oil basins, adding to upward pressure.
Analysts say the weather-related supply tightening has complicated efforts to disentangle energy fundamentals from the geopolitical premium.
Still, even after accounting for weather effects, the market’s swift reaction underscores a broader reintroduction of geopolitical risk into oil pricing — a factor largely absent in recent months.
As tensions mount, traders appear to be positioning for potential instability that could reshape global supply flows once again.
