Oil prices surged to a five-week high on Monday as geopolitical tensions and potential supply disruptions drove market concerns. Brent crude rose $1.11 (+1.5%) to close at $74.74 per barrel, while WTI crude gained $2.12 (+3.1%) to settle at $71.48 per barrel.
The Brent-WTI spread narrowed to $3.02, its lowest since July 2024. The price increase was fueled by Trump’s threat of 25%-50% secondary tariffs on buyers of Russian oil if Moscow obstructs peace efforts in Ukraine, alongside his warning of airstrikes and new sanctions on Iran, which responded by seizing two foreign tankers carrying smuggled diesel. Supply constraints also played a role, with U.S. crude production falling 305,000 bpd in January to 13.15 million bpd, the lowest since February 2024. Additional pressure came from U.S. plans to revoke Repsol’s license to export Venezuelan oil and stalled negotiations on Iraq-Turkey pipeline operations, delaying Kurdish oil exports. On the demand side, China’s manufacturing activity expanded at its fastest pace in a year, signaling stronger consumption, while Germany’s inflation decline bolstered expectations of European Central Bank rate cuts, which could support economic growth. Despite the rally, skepticism remains over Trump’s follow-through on threats, with concerns that escalating trade tensions could ultimately weigh on oil demand.