Oil Pulls Back Following Surge as Markets Assess US Reaction to Iran

Oil Prices Retreat After Significant Surge

After experiencing their most substantial four-day rally in over half a year, oil prices edged lower as investors assessed how the United States might react to ongoing unrest in Iran.

Brent crude slipped back toward $65 per barrel, following a more than 9% jump over the previous four trading days. Meanwhile, West Texas Intermediate dropped below $61. President Donald Trump encouraged Iranian citizens to persist in their demonstrations against Supreme Leader Ayatollah Ali Khamenei’s government, stating he would determine his next steps once he had more information on protester casualties.

Top Stories from Bloomberg

Trump indicated that his forthcoming actions would depend on the outcome of an upcoming National Security Council meeting. According to the Washington Post, the council convened on Tuesday without the president to develop potential strategies for him to consider.

Geopolitical Tensions and Oil Market Volatility

Market participants are closely monitoring the situation in Iran and the potential for U.S. involvement, which could disrupt the nation’s daily oil production of approximately 3.3 million barrels. U.S. Energy Secretary Chris Wright told Fox News that the United States would be open to trading Iranian oil if the current regime were to collapse.

Oil prices have rebounded at the start of the year, driven by instability in both Iran—OPEC’s fourth-largest producer—and Venezuela. This has reversed a five-month streak of declines that had been fueled by expectations of oversupply. The recent rally has surprised many traders who had bet on falling prices.

“The market is currently torn between persistent oversupply and rising geopolitical tensions,” explained Zhou Mi, an analyst at a research institute linked to Chaos Ternary Futures Co. “Short-term developments in Iran could spark further price volatility, and any military action by the U.S. would likely push oil prices even higher.”

On Wednesday, Brent’s second-month volatility approached its highest level since June. The prompt spread—the difference between the two nearest contracts—has moved further into backwardation, signaling a more bullish outlook compared to a month ago.

U.S. Oil Inventories and Physical Market Updates

Industry data suggested that U.S. crude inventories increased by 5.3 million barrels last week, which would mark the largest rise in two months if confirmed by official figures. The American Petroleum Institute also reported gains in both gasoline and distillate stocks.

Additional Developments in Global Oil Markets

In the Black Sea region, two oil tankers were attacked near the Caspian Pipeline Consortium’s terminal, further complicating Kazakhstan’s export efforts. Shipments from the area have already faced delays due to adverse weather and damage to mooring facilities.

Most Popular from Bloomberg Businessweek

©2026 Bloomberg L.P.