Oil Extends Losses

WTI crude futures jumped 10% to above $75 per barrel, the highest in eight months, before easing back to trade more than 8% higher, after unprecedented joint US and Israeli strikes on Iran sharply escalated tensions across the Middle East. Markets are closely monitoring the risk of disruptions in the Strait of Hormuz, a vital chokepoint that handles roughly one-fifth of global oil shipments. Tehran insists the strait remains open, but shipping companies quickly began rerouting vessels away from the narrow waterway. Iran also launched attacks on US assets across neighboring states, including the United Arab Emirates, Bahrain, Kuwait, Qatar, Saudi Arabia, Jordan, Iraq and Syria. Meanwhile, OPEC+ agreed on Sunday to increase production by 206,000 bpd in April, accounting for less than 0.2% of global demand.

Oil prices are poised to surge when trading resumes Sunday night, following unprecedented U.S. and Israeli strikes on Iran that have sharply escalated tensions in the Middle East. The developments have heightened fears of disruptions to global energy supplies, particularly as Iran blocked Strait of Hormuz traffic. Shipping companies swiftly began diverting vessels away from the narrow channel along Iran’s southern border that serves as a critical transit route for roughly one-fifth of the world’s oil and substantial volumes of natural gas. On Friday, WTI crude futures climbed to around $67 per barrel, hovering near a seven-month high, as traders reacted nervously to reports that U.S. officials left talks in Geneva disappointed with the lack of progress, even as Iranian and Omani participants struck a more optimistic tone.

WTI crude oil futures rose to around $67 per barrel, near a seven-month high, as the US and Iran agreed to extend nuclear talks into next week, keeping uncertainty high. Traders were nervous because officials familiar with the US position said the US delegation left talks in Geneva disappointed with progress, even as Iranian and Omani participants were more positive. The US also authorised the departure of non-emergency staff and families from Mission Israel, signalling heightened regional tensions and reinforcing risk premia. Prices have been buoyed since the start of the year by these geopolitical risks, which have helped counter broader expectations of a supply glut. Investors are also focused on an upcoming OPEC+ meeting on Sunday to decide oil supply policy, with the market watching for signs of production changes against a backdrop of continued US military deployment in the region. Considering the full month of February, oil is up around 2.5%, extending a 13.6% rally in January.