Iran–Israel war: Crude oil prices rise to near 5-month high as Brent tops $76. More upside ahead?

Crude oil prices continue to remain elevated as tensions between Iran and Israel persist for the sixth consecutive day, pushing prices close to a five-month high. Traders are particularly worried about potential disruptions to Iran’s crude oil exports of 1.5–2.0 million barrels per day (mmbpd), out of its total output of 3.4 mmbpd.

West Texas Intermediate (WTI) crude climbed as much as 0.64% on Wednesday, after surging over 4.3% on Tuesday to reach its highest level since January. Brent crude futures gained 0.5% after rising 4.4% in the previous trading session to touch $76.70 per barrel, the highest level since February.

As hostilities between the two nations deepen, with both sides escalating attacks since Friday, concerns are mounting over potential U.S. military involvement and the risk of a broader regional conflict.

On Tuesday, U.S. President Donald Trump demanded Iran’s "unconditional surrender" and warned of a possible strike against the country’s Supreme Leader, Ayatollah Ali Khamenei, in a social media post ahead of his meeting with the national security team.

While the Trump administration has maintained that the U.S. is not directly involved, the president’s latest comments indicate a shift toward a more aggressive posture, signaling possible direct intervention in support of Israel’s efforts to pressure Tehran.

U.S. weapons are seen as critical to executing a more comprehensive strike against Iran’s nuclear infrastructure than what Israel could achieve alone. Meanwhile, Israel’s military confirmed it had launched strikes near Tehran and detected missile launches from Iran, with interception efforts reportedly underway.

The conflict between the two countries began on Friday after Israel struck at Iranian nuclear and military facilities with the objective of preventing Iran from building a nuclear weapon.

Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) said on Monday it expects the global economy to remain resilient in the second half of 2025, despite growing concerns over trade conflicts. 

However, it trimmed its forecast for oil supply growth from non-OPEC+ producers in 2026, signaling potential tightening in global energy markets.

OPEC now expects U.S. output of tight oil, another term for shale, to hold steady next year at 9.05 million bpd/day. Last month, it expected small growth year on year and in January had forecast output in 2026 would reach 9.28 million bpd. In late May, OPEC+ agreed to increase oil production by 411,000 barrels per day (bpd) for July 2025.

Meanwhile, another emerging concern driving crude prices higher is the potential closure of the Strait of Hormuz—a key chokepoint for global oil trade. While this scenario has moved into focus amid rising tensions, experts believe the probability of such a closure remains low.

Iran supply risk may add $5–10/bbl, but Brent seen capped below $80

A sustained disruption of Iran’s crude oil exports by 0.5–1 million barrels per day (mmbpd) could add $5–10 per barrel to crude prices in the near to medium term, potentially pushing Brent crude to stabilise in the $75–80 per barrel range. 

However, domestic brokerage firm JM Financial believes that Brent is unlikely to rise significantly above $80 per barrel, citing a likely surplus of 1–2 mmbpd in CY25. 

This surplus, as per the brokerage, could stem from excess output growth by non-OPEC+ countries, the reversal of OPEC+’s 2.2 mmbpd voluntary cuts, and the availability of around 2 mmbpd of spare capacity with Saudi Arabia (plus an additional 1 mmbpd with the UAE), which could be deployed to offset any supply shock, especially given the strong relationship between U.S. President Trump and Saudi Arabia.

(With inputs from agencies)

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