Oil prices continued to rise on Tuesday as concerns about the turmoil in Iran and potential supply disruptions weighed on the economy
Major oil producer Iran is facing its largest anti-government protests in years. Oil investors are comparing the supply risks from Iran to the potential increase in supply from Venezuela. Growing concerns about Iran and potential supply disruptions overshadowed expectations of increased crude oil supply from Venezuela, pushing oil prices higher on Tuesday.
Brent futures rose 22 cents, or 0.3%, to $64.09 a barrel as of 04:30 GMT, near a two-month high seen in the previous session. WTI crude oil also rose 23 cents, or 0.4%, to $59.73.
The price increase was fueled by escalating protests in Iran and the possibility of US intervention.
Iran, one of the largest producers in the Organization of Petroleum Exporting Countries (OPEC), is facing its biggest anti-government protests in years. This situation has led Trump to warn of possible military intervention due to the deadly violence against protesters.
Trump is expected to meet with his top advisors on Tuesday to discuss options regarding Iran.
On Monday, the US President announced that any country doing business with Iran would be subject to a 25% tariff on all transactions with the US.
China is the country most likely to feel the effects of this, as it imports a significant portion of Iranian oil. This raises the question of whether the US, despite a trade truce between the US and China, will want to create further problems by imposing additional tariffs on China.
Political developments are important for oil markets because Iran is a major producer under sanctions, and any escalation could disrupt supply or increase the geopolitical risk premium.
The unrest in Iran has, according to estimates, added a geopolitical risk premium of approximately $3-4 per barrel to oil prices.
Markets are grappling with supply imbalance concerns due to expectations that Venezuela will return to exports, in contrast to the pullback in Iran.
Following the overthrow of President Nicolas Maduro, Trump said last week that the Caracas government was prepared to deliver up to 50 million barrels of oil to the U.S., subject to Western sanctions.
Global oil trading companies are vying for control of Venezuelan crude oil flows.
Meanwhile, Ukrainian officials said geopolitical tensions escalated as Russian forces attacked two of Ukraine's largest cities in the early hours of Tuesday.
In the United States, the Trump administration renewed its attacks on the Federal Reserve, highlighting concerns about the central bank's independence and increasing uncertainty about future economic conditions and oil demand.
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