Oil touched its highest level since November after US President Donald Trump said he would impose tariffs of 25% on goods from countries that trade with Iran, following a wave of bloody unrest in the OPEC member state.
Brent crude futures for March settlement rose 0.4% to $64.10 a barrel at 2:01 p.m. Singapore time, after earlier touching $64.38, its highest level since November 20. Meanwhile, West Texas Intermediate crude futures for February delivery also rose 0.4% to $59.75 a barrel.
Trump said on social media that the new tariffs would take effect immediately, without providing details on the scope of these tariffs or how they would be implemented.
A strong start to the year for crude oil prices
Oil made gains at the start of the new year, after a run of five monthly losses fueled by expectations of a supply glut.
This surge in violence came amid US intervention in Venezuela, including the arrest of President Nicolás Maduro, followed by a worsening wave of unrest in Iran. However, authorities in Tehran have said they have now brought the protests under control.
While price movements on Tuesday were relatively limited amid a lack of clarity regarding Trump’s latest decree, any new tariffs threaten to ignite a trade war with China, the world’s largest importer of crude oil and the buyer of about 90% of Iran’s total exports.
Unprecedented hedging against price spikes
Currently, traders are seeking to hedge against price jumps, which pushed call option trading volumes on Brent crude to an unprecedented level on Monday.
Charu Chanana, chief investment strategist at Saxo Markets in Singapore, said: The immediate impact of the tariff threats on Iran could be to add a geopolitical premium to crude prices.
She added: But the sustainable trend will depend on whether these statements translate into actionable policies, and whether they lead to tangible supply disruptions or broader trade responses that harm demand growth.
Iranian stockpiles decline
The prospect of disruptions to Iran's daily exports, which represent slightly less than 2% of global demand, has eased some concerns about a global supply glut.
Iranian stockpiles at a key export terminal have fallen by about a fifth since the start of the year, a possible indication that crude is being moved away from danger zones amid the unrest.
Elsewhere, supplies from Kazakhstan are being hampered by bad weather, maintenance work, and damage to Russian infrastructure caused by Ukrainian drone attacks.
