Oil prices surged over 4% on Wednesday as geopolitical tensions re-intensified, with traders pricing in potential supply disruptions tied to U.S.–Iran friction and stalled Russia-Ukraine peace talks. Brent crude settled up $2.93, or 4.35%, at $70.35 a barrel, while U.S. West Texas Intermediate rose $2.86, or 4.59%, to $65.19. Both benchmarks posted their highest settlements since January 30, rebounding sharply from two-week lows hit a day earlier. U.S. heating oil futures jumped roughly 5%.
The rally accelerated late in the session following media reports that Israel had raised its alert level amid indications of a possible U.S. or Israeli strike on Iran. Traders said the move reflected a renewed geopolitical risk premium, with crude reacting directly to headlines rather than underlying fundamentals.
Iranian media reported planned joint naval drills with Russia in the Sea of Oman and northern Indian Ocean, while earlier this week Iran temporarily shut portions of the Strait of Hormuz during military exercises. The waterway, which handles roughly 20% of global oil consumption, remains a focal point for traders assessing disruption risk.
Political risk consultancies suggested a material probability of U.S. military action against Iran in the coming weeks, adding to volatility. Analysts noted that the scale of U.S. military assets moving into the region is being closely watched as a potential indicator of escalation.
Meanwhile, U.S.-mediated peace talks between Russia and Ukraine concluded in Geneva without a breakthrough. Ukrainian President Volodymyr Zelenskiy described the discussions as difficult and accused Moscow of stalling. A breakdown in diplomacy could tighten enforcement around Russian oil exports, which would be supportive for prices. Russia remains one of the world’s largest crude producers, and any sustained reduction in exports would materially affect global supply.
Despite the strong rally, traders are awaiting fresh U.S. inventory data from the American Petroleum Institute and the Energy Information Administration, with analysts expecting crude stockpiles to have risen last week. For now, however, geopolitics — not inventories — is firmly in control of price direction.