The oil market is in the middle of its strongest start to a year since 2022 as supply shocks and sanctions confound expectations of a glut. Now traders are racing to cover themselves against the prospect of the US bombing Iran again.
A surge in activity across futures and options markets is already pulling up crude prices — Brent futures touched a seven-month high of more than $72 a barrel on Friday, and some analysts see a risk premium of as much as $10.
The rally — Brent is up about 18 per cent since the end of last year — represents a marked shift from just weeks ago, when traders were focused on forecasts for a record surplus, especially around now.
Instead, there’s been unexpected strength thanks to supply disruptions in the US and Kazakhstan — as well as a shunning of sanctioned crude. That’s been amplified by geopolitical risk — starting in Venezuela and extending to Iran — where President Donald Trump could order fresh strikes in a region home to about a quarter of the world’s seaborne oil trade.
“You have a potential war, and that’s the overriding factor, but it’s in addition to a much tighter market than people anticipated,” said Gary Ross, a veteran oil consultant turned hedge fund manager at Black Gold Investors LLC. “I would fasten my seatbelt and wouldn’t want to be short in this market.”
Trump said in response to reporters’ questions on Friday that he’s considering a limited strike on Iran after amassing the biggest US force since 2003. Axios reported earlier in the week that a US attack on Iran could come sooner than expected and look more like a full-fledged war.
Futures Surge
The number of Brent oil futures held surged to an all-time high this year, while last month saw record trading in options to protect against a further rally. Volatility has surged to the highest since the US last bombed Iran in June, and traders have — for the longest period in years — been charging premiums to protect against a surge.
“It does feel that the probability of limited strikes and limited retaliatory strikes from Iran seems less likely this time around,” said Jorge Leon, head of geopolitical analysis at consultant Rystad Energy AS. “It worked last year, but right now I have the feeling it’s a nuclear deal, or a wider escalation, not something in the middle.”
That prices haven’t pushed higher is a sign of how much global output has expanded.
US Energy Secretary Chris Wright even said this week that American energy dominance has made the country’s foreign policy less beholden to supply shocks.
The Organization of the Petroleum Exporting Countries and its allies steadily lifted output last year. Likewise, volumes from outside the group also hit a record, leaving global production at 108 million barrels a day at the end of 2025, according to IEA estimates. That’s almost 3 million barrels a day higher than consumption over the same period, its figures show.
Still, the first few weeks of January offered an example of how unexpected output curbs can quickly narrow that gap.
Planned exports of Kazakhstan’s CPC Blend crude fell to the lowest level in about a decade thanks to a combination of drone attacks, maintenance, damage to a production facility and bad weather. At the same time, a deep freeze in the US contributed to two of the four largest declines in American oil inventories this century. Crude stockpiles alone fell by 9 million barrels last week.
While output in both countries has since picked up again, the disruption helped to erode western stockpiles at a time when they’d been expected to grow quickly.
Physical oil traders are watching the situation in Iran closely, too.
Some refiners in Asia, the top consuming region, have begun asking about the availability of cargoes from regions outside of the Persian Gulf in order to cover themselves against the risk of disruption.
Earnings for oil supertankers, whose supply was already constrained, have also soared partly in anticipation of a US move. The market’s biggest ships are earning more than $150,000 a day, the most since the pandemic when many of them were deployed to store unwanted barrels.
Rates for the ships have been bolstered by tensions in recent days, after Iran claimed earlier this week it briefly closed part of the narrow Strait of Hormuz chokepoint, through which a fifth of the world’s barrels flow.
“Right now, the focus is overwhelmingly on Iran and what happens with the Strait of Hormuz,” said Rob Thummel, a portfolio manager at Tortoise Capital Advisors. “That is the billion dollar question.”
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Published on February 21, 2026
