WTI crude oil futures rose toward $66 per barrel on Thursday, snapping a three-day losing streak as markets braced for a third round of US-Iran nuclear negotiations in Geneva. The modest rebound reflects heightened geopolitical risk premium, yet gains remain constrained by mounting evidence of supply expansion and swelling inventories. With diplomacy and oversupply pulling in opposite directions, oil markets are entering a decisive phase.

Geopolitical Risk Supports Short-Term Prices

Crude oil traded at $65.59 per barrel on February 26, 2026, up 0.26% on the session. Investors are closely watching renewed US-Iran discussions as Washington intensifies sanctions on entities linked to Iranian oil and weapons exports. President Donald Trump has warned that limited strikes remain an option should negotiations fail, reinforcing market sensitivity to potential disruptions in Middle Eastern supply flows.

Energy markets tend to price in geopolitical risk preemptively, particularly when military rhetoric escalates. Even the possibility of constrained exports through the Strait of Hormuz — a critical global shipping chokepoint — can trigger precautionary positioning.

Over the past month, crude prices have climbed 5.13%, signaling that risk premiums have gradually re-entered the market after earlier demand-driven weakness.

Inventory Surge and Export Growth Cap Upside

Despite geopolitical support, oversupply concerns remain a powerful counterforce. The U.S. Energy Information Administration reported a 16-million-barrel increase in crude inventories last week — the largest weekly build since February 2023. Such a sharp stockpile rise suggests either softer refinery demand or stronger domestic production than anticipated.

Adding to supply pressure, Saudi Arabia is moving toward its highest crude export levels in nearly three years, while Iran has reportedly accelerated tanker loadings, according to shipping analytics data. The simultaneous expansion of exports from key producers reinforces the perception that physical markets are well supplied.

On a year-over-year basis, crude prices remain 6.76% lower, underscoring that structural demand concerns and production resilience continue to weigh on the broader trend.

Balancing Diplomacy and Fundamentals

The oil market now hinges on two variables: the outcome of US-Iran negotiations and the durability of global demand. A diplomatic breakthrough could remove a significant geopolitical premium, especially if sanctions are eased. Conversely, any escalation — including limited strikes — could rapidly tighten supply expectations and propel prices higher.

At the same time, rising inventories and export growth indicate that the market is not currently facing an immediate physical shortage. This dynamic limits the sustainability of sharp rallies unless supply disruptions materialize.

Looking ahead, traders will monitor EIA inventory data, OPEC+ production signals, and diplomatic developments for directional cues. In the near term, oil appears range-bound, with geopolitical headlines driving volatility while underlying supply fundamentals act as an anchor.