Crude Oil Prices Near 5-Month High Amid Iran-Israel Tensions: What’s Driving the Surge?

Oil prices are fluctuating as the conflict between Iran and Israel continues for the sixth straight day. Brent crude had reached $76.70 per barrel, its highest level since February, while West Texas Intermediate (WTI) was also trending up.

This rise is mainly due to fears that Iran's oil exports, about 1.5 to 2 million barrels per day could be disrupted. Iran currently produces around 3.4 million barrels per day in total.

Meanwhile, currently, Brent crude is trading at $76.54 down by 0.12% and West Texas Intermediate (WTI) is up by 0.10% to $73.34 per barrel. Earlier in the day the WTI crude has made a high of $73.39, while Brent crude was trading at $77.33 per barrel.

The current conflict began last Friday, when Israel attacked Iranian nuclear and military sites. The goal was to stop Iran from developing nuclear weapons.

Growing Fears of Wider Conflict:

The situation between Iran and Israel has intensified, with both countries launching attacks. There are also concerns that the United States could get involved, increasing the risk of a wider regional war.

U.S. President Donald Trump recently made strong statements against Iran, even hinting at a possible strike on Iran's Supreme Leader. While the U.S. has not officially joined the conflict, these comments suggest a more aggressive stance.

Israel's military has confirmed strikes near Tehran and is working to intercept missiles fired from Iran.

OPEC's Outlook and Market Impact:

On Monday, OPEC said it expects the global economy to stay strong in the second half of 2025, despite ongoing trade tensions. However, it lowered its forecast for oil supply growth from non-OPEC+ producers for 2026, which may signal tighter global supply.

The organization also announced a planned production increase of 411,000 barrels per day in July 2025. Still, U.S. shale oil output is expected to remain flat at around 9.05 million barrels per day according to reuters.

Another worry is the possible closure of the Strait of Hormuz, a critical route for global oil shipments. While the chances of this happening are considered low, it remains a key factor pushing prices higher.

What Could Happen to Oil Prices Next?

"Crude oil prices are currently being driven largely by geopolitical tensions, especially the ongoing conflict between Israel and Iran. While prices could temporarily rise to around $80-82 per barrel, this would likely depend on any major developments such as a ceasefire or escalation.

So far, despite six days of conflict, prices haven't surged significantly, indicating that much of the risk may already be priced in. In fact, oil prices were down by 1% today, suggesting limited bullish momentum unless new events unfold," said Ajay Kedia, MD of Kedia Advisory.

"The immediate support level is seen around $70 per barrel. Additionally, OPEC continues to increase supply, and global economic data remains weak, with signs of slowing manufacturing and ongoing recession fears. These factors are expected to keep a lid on oil prices in the near term," Ajay Kedia added.

Brent crude prices are unlikely to rise above $80 per barrel. This outlook is based on several factors: non-OPEC+ countries are expected to increase oil production, OPEC+ could reverse its voluntary production cuts, and both Saudi Arabia and the UAE have a combined spare production capacity of around 3 million barrels per day, which can be used to offset any supply disruptions, believes the Brokerage firm JM Financial.