Oil prices experienced a modest increase on Tuesday, as intensified worries regarding Iran and possible supply interruptions overshadowed the anticipated rise in crude supply from Venezuela. Brent futures increased by 28 cents, or 0.4%, reaching $64.15 a barrel by 0101, remaining close to a two-month high established in the prior session. U.S. West Texas Intermediate crude increased by 28 cents, or 0.5%, reaching $59.78, marking its highest level since December 8, which was observed earlier in the session. Iran, a significant producer within the Organization of the Petroleum Exporting Countries, is currently experiencing its most substantial anti-government protests in recent years. This situation has prompted a cautionary statement from U.S. President Donald Trump regarding potential military intervention in response to the violent actions taken against demonstrators.
On Tuesday, Trump is anticipated to convene with senior advisers to deliberate on strategies regarding Iran, according to a U.S. official’s statement to Reuters. The U.S. president announced on Monday that any nation engaging in commerce with Iran will face a tariff rate of 25% on all transactions with the United States. The recent developments are significant for oil markets, given that Iran is a key sanctioned producer. Any escalation in this context could potentially disrupt supply chains or introduce a geopolitical risk premium. According to Barclays, unrest in Iran has contributed approximately $3-4 per barrel to the geopolitical risk premium in oil prices.
Markets are contending with apprehensions regarding the potential influx of crude supply as Venezuela is expected to resume its exports. In the wake of President Nicolas Maduro’s removal, Trump indicated last week that the Caracas government is poised to transfer up to 50 million barrels of oil to the U.S., contingent upon Western sanctions. Oil trading houses have positioned themselves as early beneficiaries in the competition to dominate Venezuelan crude flows, outpacing U.S. energy majors.
In other developments, geopolitical tensions intensified as Russian forces initiated assaults on Ukraine’s two largest cities early on Tuesday, according to Ukrainian officials, resulting in one fatality in the northeastern city of Kharkiv. The Trump administration in the United States has intensified its criticism of the Federal Reserve, highlighting market apprehensions regarding the central bank’s autonomy and contributing to the prevailing uncertainty surrounding future economic conditions and oil demand.