Geopolitical Whipsaw: Iran Tensions Escalate Then Fade
The dramatic price swings were driven primarily by escalating and then rapidly diminishing geopolitical tensions surrounding Iran, compounded by the resumption of Venezuelan oil exports.
Early in the week, crude oil jumped as massive protests and a violent government crackdown created the most significant Middle East supply risk since mid-2025. President Trump helped drive fears when he canceled meetings with Iranian officials and posted online that “help is on its way” to Iranian protesters. Trump’s moves also raised concerns of potential military strikes that sent prices surging toward multi-month highs.
The rally ended abruptly, however, and prices plunged on Thursday after Trump signaled he was stepping back from immediate military action. Trump based his reversal on assurances he had received from “very important sources” that the killing and scheduled executions in Iran had stopped.
Venezuela Production Resumes, Adding to Supply Glut Concerns
The sudden reversal in prices also brought back into focus concerns over the supply glut that has overwhelmed the market for months. Compounding the issue was the news that Venezuela had begun reversing production cuts and resuming oil exports following the U.S. military operation that removed President Nicolas Maduro.
War Premium vs Supply Reality: The Key Question for Bulls
Looking ahead to this week, the focus is likely to remain on the Middle East with speculators applying enough of a war premium to hold the market above key support. Even if Iran does experience temporary disruptions, the global surplus suggests any rally would be short-lived unless the supply loss is sustained and substantial.
The big question for bullish traders is how long can the hope of a supply disruption outweigh the reality of a supply glut? When that question is answered, crude oil prices will either be sharply higher or resuming its downtrend.
