Oil News: Iran Tensions Lift Crude Oil—Can Geopolitics Override Surplus Fears?

WTI Surges on Iran Tensions — But Oversupply Threatens the Rally

Nearby WTI futures settled at $65.21 last week, up $4.14 or 6.78%—marking the sixth straight weekly gain. Traders are feeding off escalating U.S.-Iran tensions and tighter U.S. inventories, pushing both WTI and Brent to multi-month highs. But analyst consensus is screaming oversupply.

War Premium Is Real — Persian Gulf Risk Is Pricing In

The biggest catalyst? Geopolitics. President Trump warned Tehran it faces military action unless it accepts a new nuclear deal. The U.S. deployed additional naval assets to the Persian Gulf, and Iran just announced live-fire military drills in the Strait of Hormuz next week. Roughly 20% of global seaborne oil flows through that chokepoint.

Traders are pricing in disruption risk even without actual barrel losses. Stack that with drone strikes on Russian tankers in the Black Sea and tightening U.S. sanctions on Russian fuel exports to Asia, and you’ve got a risk premium that’s hard to ignore.

U.S. Inventories Are Tightening — For Now

The latest EIA report showed a 2.3-million-barrel draw in commercial crude stocks. At 423.8 million barrels, U.S. inventories are sitting about 3% below the five-year seasonal average. That shift from earlier January builds is giving buyers confidence that near-term demand is absorbing supply.

But the Oversupply Math Isn’t Going Away

Here’s where bulls need to be careful. A recent Reuters poll of 31 economists and analysts forecasts Brent averaging just $62.02 per barrel in 2026, with WTI projected at $58.72—both well below current levels. Global oil markets face a structural surplus ranging from 0.75 to 3.5 million barrels per day this year.

OPEC+ paused production hikes for Q1 2026 after raising output targets by 2.9 million barrels daily last year. Analysts expect the group will watch consumption patterns closely before making any big moves.

What Traders Should Watch Next Week

Geopolitical risk premiums could extend if Iranian tensions escalate or we see actual supply disruptions—potentially pushing prices into the low-to-mid $70s. On the flip side, any clear de-escalation signals or a surprisingly bearish inventory report could trigger profit-taking back toward consensus forecast levels near $60. For now, the war premium is underpinning the rally, but the fundamental backdrop of excess supply capacity says don’t get too comfortable chasing this move.

Technically, both the weekly swing chart and the 52-week moving average are signaling an uptrend, but the market is facing headwinds inside a key retracement zone. Traders will also be monitoring a long-term pivot for direction.

The breakout over the 52-week moving average at $60.64 triggered the huge rally. This is understandable since it had been capping gains since late September. This is the support.

The next surge was fueled by a recovery of the long-term pivot at $63.62. This indicator will determine the strength of the trend.

The intermediate range is $75.12 to $54.70. Its retracement zone at $64.91 to $67.31 is potential resistance. Buyers tested this zone last week before stopping at $66.48.

For longer-term traders, the 52-week moving average has to continue to hold as support. Short-term traders need to see a support base built over the pivot at $63.62. Enough momentum then has to build to trigger a breakout over the top of the retracement zone at $67.32.

If enough buyers don’t show up to overcome the retracement zone then we’re likely to become rangebound with the 52-week moving average the floor and the zone the ceiling.

More Information in our Economic Calendar.