Oil prices are holding close to six-month highs as markets react to a sharply escalated warning from U.S. President Donald Trump, who said Iran has “10 to 15 days” at most to reach a nuclear agreement. The statement comes amid the largest U.S. military buildup in the Middle East since 2003, heightening the probability that diplomacy could give way to force.

Brent crude is trading just under $71 per barrel, positioning for a weekly gain of roughly 5%. The rally reflects mounting fears that any military action could disrupt supply from a region that remains central to global energy flows.

Geopolitical Risk Premium Returns

The latest price surge underscores how quickly geopolitical risk can reassert itself in energy markets. Iran, an OPEC member, produces more than 3 million barrels per day — about 3% of global output — and primarily exports to China. While its production alone would not typically destabilize global supply, the greater concern lies in potential retaliation.

The Strait of Hormuz remains the most critical chokepoint. A blockade or sustained disruption could affect a substantial portion of global oil flows. Even temporary interference would amplify volatility and inject a sizable risk premium into crude benchmarks. Market participants are also weighing reports that the U.S. could pursue either a limited strike aimed at pushing Tehran back to negotiations or a broader campaign. The scope and duration of any operation will likely determine whether the current rally extends or proves short-lived.

Physical Market Signals Tighten

Beyond headline risk, physical market indicators are reinforcing bullish sentiment. Brent’s one-year timespread has widened into its deepest backwardation since June — a structure indicating tight prompt supply relative to future availability. The six-month spread has also strengthened, confirming immediate demand for barrels.

Options markets reflect the same tone. Skews in both Brent and West Texas Intermediate show a heavier bias toward bullish call options, signaling growing expectations of price upside.

Adding fundamental support, U.S. crude inventories fell by approximately 9 million barrels last week, marking the largest weekly decline since early September. Product stocks also decreased, suggesting resilient end-user demand despite earlier surplus projections that weighed on prices late last year.

Political and Economic Implications

A sustained oil rally carries implications beyond energy markets. Higher crude prices would likely filter into gasoline costs, adding inflationary pressure in the United States at a politically sensitive moment ahead of midterm elections.

At the same time, the United Nations nuclear watchdog has warned that Iran’s diplomatic window may be closing, raising the probability that negotiations fail to deliver a resolution.

For investors in both the U.S. and global markets, the path forward hinges on whether diplomatic signals strengthen or military preparations accelerate. If tensions de-escalate, part of the geopolitical premium could unwind. However, a prolonged conflict or direct supply disruption could drive prices materially higher from current levels. For now, oil remains bid, with structural indicators and geopolitical uncertainty aligned in support of elevated pricing.