Oil nears six-month highs amid rising US-Iran tensions and supply concerns

Oil prices traded near six-month highs on Friday, poised for their first weekly gain in three weeks on growing concern over potential conflict after Washington said Tehran will suffer if it does not agree to a nuclear deal in a matter of days.

Brent crude futures edged down 33 cents, or around 0.5%, to $71.33 a barrel by 1343 GMT while U.S. West Texas Intermediate crude lost 25 cents, or 0.4%, to $66.18.

Over the week, Brent and WTI were both up around 5.3%.

“Market players are now awaiting how tension in the Middle East will evolve over the weekend; the appetite to take profit and close a position is also limited ahead of the weekend,” UBS oil analyst Giovanni Staunovo said.

President Donald Trump said on Thursday that “really bad things” would happen if Iran does not agree to curtail its nuclear program, setting a deadline of 10 to 15 days.

Iran, meanwhile, has planned a joint naval exercise with Russia, a local news agency reported, days after closing the Strait of Hormuz temporarily for military drills.

The major oil producer lies opposite the oil-rich Arabian Peninsula across the Strait of Hormuz, through which about 20% of global oil supply passes. Conflict in the area could limit oil entering the global market and push up prices.

“We’re waiting for a potential binary outcome, if we should take Trump’s words at face value,” said Ole Hansen, head of commodity strategy at Saxo Bank. “The market is nervous, it’s going to be a wait-and-see day.”

Traders and investors ramped up purchases of call options on Brent crude in recent days, betting on higher prices, Saxo Bank analysis shows.

Also supporting oil were reports of falling crude stocks and limited exports in the world’s biggest oil-producing and exporting countries.

U.S. crude inventories dropped by 9 million barrels as refining utilization and exports climbed, an Energy Information Administration report showed on Thursday. [EIA/S]

Markets were also considering the impact of ample supply, with talks of OPEC+ leaning towards a resumption in oil output increases from April.

The oil surplus that was evident in the second half of 2025 continued in January and is likely to persist, JP Morgan analysts Natasha Kaneva and Lyuba Savinova said in a note.

“Our balances continue to project sizeable surpluses later this year,” they said, adding that output cuts of 2 million barrels per day would be needed to prevent excess inventory builds in 2027.

Reporting by Anna Hirtenstein in London. Additional reporting by Laila Kearney in New York and Trixie Yap in Singapore. Editing by Elaine Hardcastle and David Goodman.