Oil prices rose for a second consecutive day, reaching a new high for 2026, driven primarily by a heightened geopolitical risk premium linked to escalating tensions between the US and Iran.

Geopolitical Tensions and Market Concerns

Prices increased as negotiations showed little progress, with the US Vice President stating Iran was not addressing key demands. The US has increased its military presence near Iran and the President issued new threats. Analysts note market participants are increasingly concerned about "imminent action." A significant additional worry is reports that any military action could be protracted over weeks, much longer than previous strikes, raising questions about the scale of US action and Iran's potential response.

Price Movement and Supporting Factors

Brent crude futures were 2% higher at $71.8 per barrel, while West Texas Intermediate futures were 2.24% stronger at $66.7 per barrel. Beyond geopolitics, analysts suggest the market is "tighter than what many analysts have been expecting." This tightness is attributed to sanctioned oil supply, particularly from Russia, increasingly struggling to find buyers, even in traditional markets like India. This is tightening the "real" market as buyers shift to Saudi Arabian or Western volumes.

Inventory Data

US crude storage levels fell by 0.61 million barrels last week. However, this decline only partially offset a massive 13.4 million-barrel inventory surge the prior week, which was the highest weekly increase since January 2023.