Oil Heads for First Weekly Gain Fueled by Iran-US Tensions
Oil prices hovered near a six-month high on Friday (February 20th), and were on track to post their first weekly gain in three weeks. Bullish sentiment was fueled by market concerns over potential conflict, after Washington warned Tehran would "suffer consequences" if it failed to reach a nuclear deal within days.
In midday trading, Brent fell slightly by around 0.5% to $71.33/barrel, while WTI weakened by around 0.4% to $66.18/barrel. Despite the small corrections, both were still up around 5.3% weekly, underscoring the substantial risk premium the market is currently placing on the market.
UBS believes that market participants are now waiting to see how Middle East tensions develop over the weekend, so the incentive to take profits appears limited. With the risk of rapidly changing headlines, many traders are choosing to hold positions rather than close them ahead of the weekend.
From a geopolitical perspective, US President Donald Trump said Iran has 10–15 days to agree to curbs on its nuclear program—otherwise, “very bad things” could happen. Meanwhile, Iran is reportedly planning naval exercises with Russia, days after temporarily closing the Strait of Hormuz for military exercises.
The Strait of Hormuz has once again become a crucial point, as approximately 20% of global oil supplies pass through this route. If a conflict disrupts shipping flows, supplies to the global market could tighten rapidly—and prices could potentially rise further.
Beyond geopolitics, oil is also receiving support from fundamental US data: US crude inventories fell by around 9 million barrels, according to the EIA, as refinery utilization and exports increased. In the derivatives market, interest in Brent call options has also increased in recent days—a sign that some market participants are betting that prices could continue to rise.
Source: Newsmaker.id
