Oil prices jumped sharply this week, climbing more than 3% in just one day. The sudden rise came after the US imposed new sanctions on Iran and as hopes grew for a new trade deal between the United States and the European Union. These developments sent a wave of activity through global energy markets, with investors and analysts watching closely.
As of Thursday evening, Brent crude—the global oil benchmark—rose by 3.2%, reaching $90.48 per barrel. Meanwhile, West Texas Intermediate (WTI), the US benchmark, also climbed 3.2%, trading at $85.84 per barrel. This is one of the biggest one-day increases in oil prices so far this year.
What’s Going On With Oil Prices?
Oil prices are highly sensitive to global events. When something happens that could affect the supply of oil—like a conflict, a natural disaster, or economic sanctions—prices usually go up. That’s exactly what we saw this week.
On Wednesday, the United States placed new sanctions on Iran’s oil and petrochemical trade. These sanctions were a response to Iran’s support for militant groups and came just days after Iran-backed forces launched attacks on Israel. The sanctions target several companies and ships that help Iran sell oil around the world. These moves are likely to limit Iran’s ability to export oil, reducing the overall global supply.
At the same time, there was some positive news on the economic front. There’s growing optimism that the US and EU might soon agree on a new trade and technology deal. If this deal goes through, it could boost business between the two sides, potentially increasing demand for energy, especially oil.
Iran’s Role in the Oil Market
Iran is one of the world’s largest oil producers, but its exports have been limited for years due to international sanctions. However, in recent months, Iranian oil shipments had started to rise again, especially to countries in Asia. Analysts say that in March 2024, Iran exported close to 1.56 million barrels per day, the highest level in six years.
With new US sanctions now in place, that number could drop again. Less oil from Iran means higher prices globally, especially if other countries can’t quickly fill the gap.
In a statement, the US Treasury Department said the new sanctions show the country’s commitment to “targeting Iran’s support for terrorism and efforts to fund militant groups through its oil sales.”
Could This Lead to an Oil Shortage?
Not right away—but it’s possible in the longer term.
Right now, the global oil supply is still fairly stable. Other major producers like Saudi Arabia, the UAE, and Russia continue to pump large amounts of oil. But if Iranian exports fall significantly, it could tighten the market, especially if demand rises later this year.
There’s also the risk of further conflict in the Middle East, which could impact oil flows through key areas like the Strait of Hormuz. This narrow waterway is where a large portion of the world’s oil passes through. Any disruption there would likely send prices soaring even higher.
What the Experts Are Saying
Energy experts and market analysts are paying close attention.
One energy strategist said that the market is reacting to “a mix of geopolitical tension and economic optimism.” In simple terms, there’s fear of less oil supply due to Iran, but also hope that more trade between big economies will boost oil demand.
Other experts say that $90 per barrel is a key level. If prices stay above this mark, it could lead to more inflation around the world. Higher oil prices usually mean higher costs for transportation, goods, and even food. That’s why governments are watching closely too.
Impact on Consumers and Countries
If oil prices stay high, it will affect everyone.
- Drivers could see fuel prices rise at the pump.
- Airlines and shipping companies might raise their prices to cover increased fuel costs.
- Countries that import oil, like India and Japan, may face more economic pressure.
- On the other hand, oil-exporting countries in the Middle East could benefit. Higher prices mean more revenue for governments in places like the UAE and Saudi Arabia.
In fact, countries like the UAE have been using recent oil profits to invest in infrastructure, tourism, and green energy projects.
Will Prices Keep Rising?
That depends on what happens next. If tensions between the US, Iran, and Israel grow, oil prices could go even higher. But if things calm down or if the US and EU strike a major trade deal that stabilises markets, prices might level off.
There’s also the question of how much oil other countries can produce. OPEC+ (the Organisation of the Petroleum Exporting Countries plus allies like Russia) controls a large share of global oil supply. If they decide to increase output to make up for Iran, that could help ease prices.
Still, with summer approaching—a time when fuel demand usually rises due to travel—the market is likely to stay tight.
What Should You Watch For?
Here are some key things to keep an eye on:
- More US or EU sanctions on Iran or others
- Talks or deals between the US and EU
- OPEC+ meetings and decisions on oil output
- Any conflict in the Middle East that could affect oil routes
The oil market is known for being unpredictable, and even small changes can have a big impact. But one thing’s clear: energy will continue to play a central role in global politics and economics this year.
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