Oil Prices Climb 5% WoW on Lingering Geopolitical Concerns
Oil prices surged week on week, supported by escalating geopolitical tensions, severe weather-related supply disruptions in the US, and heightened uncertainty surrounding sanctions.
The weekly price surge also reflected US trade policy concerns, although momentum eased toward the end of the week as fresh supply prospects capped further upside.
Brent crude traded at $68.53 per barrel, up by about 5% week on week (WoW) from last Friday’s close of $65.40. US benchmark West Texas Intermediate (WTI) rose 5.1% to $64.33 per barrel, compared with $61.20 a week earlier.
The main driver of the rise was the sharp escalation in geopolitical risks centered on the Middle East. Tensions between the US and Iran significantly lifted risk premiums, as Washington’s increasingly aggressive rhetoric and the deployment of US naval assets raised fears of potential supply disruptions.
Iran’s pledge to respond forcefully to any attack, combined with its role as the Organization of Petroleum Exporting Countries’ (OPEC) fourth-largest producer, kept markets focused on the risk of disruptions to regional oil flows throughout the week.
Ongoing coordination between US and Israeli military officials further reinforced perceptions of rising regional instability. Prices also found strong support from supply disruptions in the US, where extreme cold weather severely curtailed crude production, refinery operations and exports, particularly along the Gulf Coast.
The National Weather Service reported snow depths exceeding 50 centimeters in parts of the country, while wind chill temperatures plunged to as low as minus 31 degrees Celsius, highlighting the severity of the cold wave. Adverse weather conditions brought crude oil exports from the US Gulf Coast close to a standstill, tightening near-term supply.
Market estimates indicated that around 2 million barrels per day of oil supply were temporarily taken offline over the weekend. Officials warned that the cold wave, affecting roughly two-thirds of the US, could persist in the coming days, raising concerns that supply disruptions may last longer than initially anticipated.
These outages were reflected in falling inventories, with data from the US Energy Information Administration showing that commercial crude oil stocks declined by about 2.3 million barrels last week, reinforcing expectations of a tighter market in the world’s largest oil-consuming country.
Monetary policy developments further supported the market. Comments suggesting that progress in the US fight against inflation has been uneven kept expectations for policy easing alive.
The Federal Reserve held its benchmark interest rate steady at 3.5%-3.75% at its first Federal Open Market Committee meeting of the year, in a decision approved by a 10-2 vote.
Expectations that lower interest rates later in the year could stimulate economic activity continued to underpin oil demand. Geopolitical risks were also influenced by Washington’s latest sanctions move targeting Cuba.
US President Donald Trump signed an executive order declaring a national emergency and authorizing tariffs on countries supplying oil to the island, a step intended to protect US national security and foreign policy interests by restricting energy flows to Havana, which has already faced critical shortages due to halted Venezuelan shipments and a suspension of Mexican deliveries.
This escalation lifted geopolitical risk premiums and added upward support to prices. However, markets also weighed the potential impact of these tariffs on global economic activity, with analysts warning that heightened trade barriers could dampen growth and weaken oil demand, exerting downward pressure on prices.
China’s public rejection of the tariffs and its support for Cuba further underscored broader geopolitical and trade frictions, creating mixed signals for oil markets.
Gains were also capped by mounting expectations of rising supply, particularly from Venezuela.
Venezuelan lawmakers enacted sweeping reforms to the country’s hydrocarbon laws, significantly reducing the state’s oil monopoly and opening the sector to greater private and foreign participation.
The reform lowers taxes and royalties, grants private producers operational autonomy, and allows disputes to be settled in international or US courts.
On the same day the law was signed, the US Treasury Department issued a general license easing several sanctions on Venezuelan crude, allowing US companies to lift, transport and refine Venezuelan-origin oil. These developments reinforced expectations of increased Venezuelan output over time, easing near-term supply concerns.
Additional pressure came from progress toward restarting production at Kazakhstan’s Tengiz field and the normalization of export capacity through the Caspian Pipeline Consortium. Strong non-OPEC supply growth continued to weigh on the medium-term outlook, fueling concerns that global oil markets could slip into surplus later in the year.
Lingering uncertainty over US trade policy and the absence of any expected changes to production levels at the upcoming OPEC+ meeting also limited upside momentum, prompting some profit-taking toward the end of the week despite sustained geopolitical risks. Oil Prices Surge as ‘Massive Armada’ Heads Towards Iran
