Oil on edge as US signals readiness to hit Iran – Rystad Energy market note

Oil prices have risen sharply to $71.50 per barrel over the past few hours – their highest level since late September 2025 – driven by mounting market speculation of an imminent US military strike on Iran.

Domestic pressure on the Iranian leadership has eased in recent weeks following a forceful security crackdown that significantly curtailed protests that have been ongoing in the country for weeks.

However, external pressure from the US has intensified markedly over the past several days. US President Donald Trump said on 28 January that a US naval armada in the region — led by the USS Abraham Lincoln, which arrived only days ago — was ready to carry out its mission “with speed and violence, if necessary”.

Trump also warned that time was running out for Iran to accept a new nuclear agreement.

Markets appear to be taking these statements seriously, particularly given the administration’s track record of following through on military threats, in contrast to its trade-related rhetoric, which has often been scaled back or delayed.

In June last year, US threats toward Iran materialized in direct strikes on Iranian nuclear and military assets — an unprecedented step for a US administration.

Similarly, in December, following public accusations of systematic killings of Christians in Nigeria, the US launched strikes against ISIS targets in the country.

More recently, after weeks of escalating external pressure, Venezuelan President Nicolás Maduro was captured and extradited to the US. These precedents have reinforced the perception that current warnings toward Iran carry a high probability of action.

A comparison with oil price behavior ahead of the start of the 12-day war last year involving the US, Israel and Iran provides a useful reference point for assessing current market dynamics.

In the two days preceding the US strike on Iranian nuclear facilities during that episode, oil prices rose by approximately $3.7 per barrel, as markets rapidly priced in the risk of escalation and potential supply disruption.

The current price trajectory shows a comparable — and slightly stronger — reaction. Oil prices have increased by around $4.3 per barrel since strong rumors of a renewed US attack on Iran began circulating a few days ago, suggesting markets are assigning a similar, if not higher, probability to near-term military action and associated supply risks.

That said, not all of the recent oil price upside can be attributed to geopolitical risk alone. A cold snap in the US has also contributed to upward price pressure by temporarily disrupting domestic oil production and logistics, particularly in weather-sensitive basins and infrastructure.

This weather-related tightening has amplified the price response, complicating efforts to isolate the pure geopolitical premium embedded in current prices.

Even after accounting for these weather effects, however, the magnitude and speed of the recent price increase indicate a clear return of a geopolitical risk premium, comparable to that observed in the immediate run-up to the previous conflict.