Written by Oil prices rose to a two-month high on Wednesday as traders priced in a heightened risk premium on Iran, where protests have been raging, and President Trump said the country’s ruling regime would “pay a big price.”
International pricing benchmark Brent crude (BZ=F) and US benchmark West Texas Intermediate (CL=F) have both gained more than 10% over the past five trading sessions to trade above $66.10 and $61.80 per barrel, respectively, for the first time since October as geopolitical tensions have roiled global energy markets.
As tensions have somewhat stabilized in Venezuela and shipments have resumed — commodities trading houses Vitol and Trafigura have begun moving Venezuelan crude out of the country — attention has turned toward Iran, a perennial oil focal point in the Middle East.
“Iran’s at the nerve center of the global oil market,” said Ben Cahill, the director for energy markets and policy at the University of Texas Austin’s Center for Energy and Environmental Systems Analysis.
“If there’s a physical supply disruption, the market will react in a big way.”
Iran is a crucial point of leverage for oil prices for two reasons: its production and geography.
First, the country produces more than 3 million barrels and exports around 1.5 million barrels per day. It is also sitting on more than 200 billion barrels of proved reserves, ranking only behind Venezuela and Saudi Arabia globally. Iran also has a geological advantage over Venezuela, with its lighter, medium-weight oil that’s easier to refine and more attractive for producers and buyers.
Iran also largely controls the Strait of Hormuz, a global chokepoint for oil flows.
In 2024, an average of 20 million barrels per day of oil — or around 25% of the total global seaborne trade of petroleum products — moved through the Strait, which connects the Persian Gulf to the Gulf of Oman and the Arabian Sea. Any attempts by Iran to close the Strait would put immediate and severe upward pressure on oil prices.
On June 13, 2025, Israeli military forces launched airstrikes against Iranian military and nuclear infrastructure, and Iran retaliated. Even though the Strait of Hormuz was never actually closed, the price of Brent jumped by roughly 7%, from $69 per barrel to $74 per barrel, within one day.
The impact of any disruptions hinges on just how many barrels of oil are taken off the market, alongside other risks, such as the fall of Iran’s Supreme Leader Ayatollah Khamenei or the US ramping up threats.
“In a situation of widespread upheaval, it’s very likely that skilled workers are unable to actually get to [production and export facilities], and when they get there, do they have basic things like electric power?” said Clay Seigle, a senior fellow at the Center for Strategic and International Studies.
“Those two things together make me think that there is a strong chance of at least limited interruptions in production” as tensions continue to rise, Seigle said.
A scenario in which the fallout results in Iran’s production and exports dropping to near zero is unlikely, according to Cahill, “but it’s worth considering.”
“If it happens quickly, there would be a huge shock to the market,” Cahill added.
For an example of what could happen under a severe and sustained political upheaval in Iran, look to the Iranian Revolution, said Jorge León, head of geopolitical analysis at Rystad Energy.
In 1978, protests against the long-established monarchy under the Shah Mohammad Reza Pahlavi swelled throughout the country. By February 1979, Pahlavi had fled the country, and the exiled religious leader Ruhollah Khomeini came to power, transforming Iran into a theocratic Islamic Republic.
In the years leading up to 1978, Iran was producing more than 5.7 million barrels per day (bpd). In 1979, production was cut nearly in half, to 3.2 million bpd, and fell further to 2.7 million bpd in 1980, according to data from Rystad Energy.
A loss of exports from Iran would also be a blow to China, analysts told Yahoo Finance. As in Venezuela, China is the biggest buyer of Iranian crude, having purchased more than 80% of the regime’s shipped crude in 2025. Much of that buying is by smaller independent Chinese refiners called “teapots” that are willing to buy sanctioned barrels in return for a risk discount. Iran’s oil has been under strict sanctions by the US Treasury Department since 2018.
With barrels from both Venezuela and Iran off the market, Chinese refiners might shift to Russian oil — whose sellers would likely raise the price — or to the domestic stores the Chinese government spent 2025 heavily stockpiling in what analysts have said is likely a move for geopolitical insurance to assure that Beijing can’t be squeezed by disrupted flows.
The regime in Tehran also faces a US administration in Washington willing to ratchet up the pressure.
In a post on Truth Social on Monday afternoon, President Trump announced that any country conducting business with Iran would face a 25% tariff on any business done with the US, effective immediately. The next morning, the president said in a second post that the Iranian regime would “pay a big price” and said to protesters, “HELP IS ON ITS WAY.”
Oil prices jumped in the minutes after both posts.
Fundamentals are the tempering element on a global jump in prices. The oil market is facing a supply glut of around 3.6 million barrels per day, according to estimates from the International Energy Agency.
Given this oversupply, any disruptions would need to be sustained and severely impact Iranian exports for the upward price action to continue.
“This is a very well-supplied oil market at the moment, and we’ve seen time and time again that geopolitical risks are just failing to register,” Cahill said.
Still, traders shouldn’t totally discount geopolitical risks, Rystad’s León said. And the data shows they’re taking this view.
Monday was the single busiest day ever for trading in Brent crude call options, as traders looked to protect themselves against a sudden spike in prices, according to Intercontinental Exchange data compiled by Bloomberg. Implied volatility also reached its highest level since the US and Israel bombed Iran in June, data showed.
“Just the fact that there’s civil unrest in a very important oil-producing country will probably add upside pressure,” León told Yahoo Finance.
Jake Conley is a breaking news reporter covering US equities for Yahoo Finance. Follow him on X at @byjakeconley or email him at jake.conley@yahooinc.com.
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