Oil prices rallied on Thursday as rising geopolitical tensions in the Middle East and the risk of U.S. involvement in the Israel-Iran conflict pushed crude futures to multi-month highs.
Brent crude oil, against which Nigerian oil is priced, gained $2.15 to settle at $78.85 per barrel while the West Texas Intermediate (WTI) rose by $2.06 or 2.7 percent to close at $77.20.
The gains came despite reduced trading volumes due to a U.S. federal holiday, highlighting the market’s sensitivity to geopolitical risks in the world’s most critical oil transit corridor.
The escalation began after Israeli forces reportedly struck Iranian nuclear facilities in response to Tehran’s overnight missile and drone attack on an Israeli hospital. With no signs of de-escalation and rhetoric intensifying on both sides, energy markets are pricing in a growing premium on supply security.
Iran, the third-largest crude producer in the Organization of the Petroleum Exporting Countries (OPEC), currently produces around 3.3 million barrels per day. Any potential disruption to its output or to tanker movements through the Strait of Hormuz—a key transit route for up to 21 million barrels per day—could have significant implications for global supply chains.
U.S. Role Under Consideration
Investor caution has also been fuelled by political uncertainty in Washington. The White House confirmed on Thursday that President Donald Trump will decide in the next two weeks whether the U.S. will intervene in the conflict. This prospect has contributed to bullish sentiment, as analysts now believe a growing consensus supports the likelihood of U.S. military engagement in the region.
“Consensus in the market is increasingly forming that we will see U.S. involvement in some way,” said Rory Johnston, founder of Commodity Context. “The geopolitical risk premium is now back on the table.”
Risk Premium Returns to the Market
Analysts at Goldman Sachs noted that a $10-per-barrel geopolitical risk premium is justified under current circumstances, warning that Brent could surge above $90 per barrel if the conflict intensifies. JPMorgan issued a more severe projection, estimating that a full regional escalation and closure of the Strait of Hormuz could send crude prices soaring to $120–$130 per barrel.
However, some analysts expect the price shock to be temporary. DBRS Morningstar stated in a note that if hostilities recede, the war premium will deflate, and prices are likely to cycle lower. The agency also warned that a sustained surge in oil prices would compound tariff-related headwinds and weaken global demand.
Market Complacency Shaken
Phil Flynn, senior analyst at the Price Futures Group, said the market has been underpricing geopolitical risk. “This conflict knocks oil out of its complacency,” Flynn stated. “Even if the situation stabilises, we are unlikely to return to the low $60s range seen just a month ago.”
OPEC+ Maintains Course
Despite the emerging risks, Russia’s Deputy Prime Minister Alexander Novak said on Thursday that OPEC+ should proceed calmly with its output expansion plans. Speaking at an economic forum in St. Petersburg, Novak urged producers not to alarm markets with aggressive supply projections but to align production with summer demand growth.
Outlook
The oil market remains highly reactive to political developments in the Middle East. With Iran playing a pivotal role in global supply and the Strait of Hormuz functioning as a vital chokepoint, further escalation may amplify supply-side risks.
As investors continue to monitor the situation, crude futures are likely to remain volatile, pricing in a broader range of potential outcomes depending on military, diplomatic, and trade developments.
