Yahoo Finance – Oil prices rose to a two-month high on Wednesday as traders priced in a heightened risk premium on Iran, where protests have been raging, and President Trump said the country’s ruling regime would “pay a big price.”
International pricing benchmark Brent crude (BZ=F) and US benchmark West Texas Intermediate (CL=F) have both gained more than 10% over the past five trading sessions to trade above $66.10 and $61.80 per barrel, respectively, for the first time since October as geopolitical tensions have roiled global energy markets.
As tensions have somewhat stabilized in Venezuela and shipments have resumed — commodities trading houses Vitol and Trafigura have begun moving Venezuelan crude out of the country — attention has turned toward Iran, a perennial oil focal point in the Middle East.
“Iran’s at the nerve center of the global oil market,” said Ben Cahill, the director for energy markets and policy at the University of Texas Austin’s Center for Energy and Environmental Systems Analysis.
“If there’s a physical supply disruption, the market will react in a big way.”
‘At least limited interruptions in production’
Iran is a crucial point of leverage for oil prices for two reasons: its production and geography.
First, the country produces more than 3 million barrels and exports around 1.5 million barrels per day. It is also sitting on more than 200 billion barrels of proved reserves, ranking only behind Venezuela and Saudi Arabia globally. Iran also has a geological advantage over Venezuela, with its lighter, medium-weight oil that’s easier to refine and more attractive for producers and buyers.
Iran also largely controls the Strait of Hormuz, a global chokepoint for oil flows.
In 2024, an average of 20 million barrels per day of oil — or around 25% of the total global seaborne trade of petroleum products — moved through the Strait, which connects the Persian Gulf to the Gulf of Oman and the Arabian Sea. Any attempts by Iran to close the Strait would put immediate and severe upward pressure on oil prices.