Oil prices began the week on a weaker footing amid renewed optimism over a potential nuclear deal between the United States and Iran. However, sentiment shifted sharply in the second half of the week, with oil prices rallying as geopolitical tensions between Washington and Tehran intensified, injecting fresh uncertainty into global energy markets.
A report from Axios suggested that the prospect of a military conflict between the United States and Iran appears increasingly likely. According to sources cited in the report, there is currently no sign of a diplomatic breakthrough, and frustration is growing within the administration of Donald Trump.
The report noted that recent U.S. military build-up and escalated rhetoric may make it difficult for the White House to de-escalate tensions without Iran offering significant concessions on its nuclear program. Any potential military operation, according to the sources, would likely be extensive, potentially involving a weeks-long campaign resembling a full-scale war rather than a limited strike.
The oil market is highly sensitive to geopolitical risk especially when it involves Iran. The primary concern is the security of the Strait of Hormuz, a narrow waterway through which roughly one-fifth of the world’s oil supply flows every day.
Any disruption to shipping in this critical chokepoint could severely constrain global supply, triggering sharp price increases. Even the threat of disruption is enough to push traders into defensive positioning.
As a result, traders have been aggressively adding long oil positions to hedge against the risk of potential weekend developments, when markets are closed but geopolitical events can still unfold.
Interestingly, the Axios report also mentioned that U.S. officials have given Iran a two-week window to return with a detailed proposal following recent talks. This timeline echoes a familiar pattern. In past confrontations, similar deadlines have preceded rapid escalations, reinforcing traders’ perception that the current situation could reach a decisive point quickly.
Whether this deadline leads to renewed diplomacy or further escalation remains uncertain, but the compressed timeframe is contributing to heightened market anxiety.
Beyond geopolitics, oil markets are also watching a major economic catalyst: a potential ruling from the Supreme Court of the United States on Trump-era tariffs. If the court rules against the tariffs, it could improve global growth expectations by easing trade tensions. Stronger growth typically translates into higher oil demand, which would likely support further gains in crude prices.
In contrast, if tariffs remain in place, growth expectations could remain subdued, limiting upside in oil.
Fuel card prices for next week are expected to rise by 0.6ppl; however, there is a risk of a significant increase in the first week of March if oil prices remain elevated.
