Athira Sethu
Kochi, 12 June 2025
Oil prices increased sharply on Wednesday to their two-month high. This followed after the United States indicated it could evacuate its embassy in Iraq due to the increased threat in the Middle East.
Brent oil crossed the $70 a barrel mark in early trading on Thursday. The US crude variety, WTI, also rose. Brent climbed by $2.90 to $69.77 a barrel, and WTI gained $3.17 to $68.15.
Experts attest that the market was caught off guard by this new risk. Phil Flynn, an energy analyst, explained the market was not anticipating things to become so tight so fast.
One of the biggest sources of tension is Iran. Iran’s Defense Minister, Aziz Nasirzadeh, threatened that if negotiations with the US on nuclear matters do not succeed, Iran can strike US military installations in the region. He stated that in case of war breaking out, the US will face more losses and would be forced to vacate the region. He also stated that Iran can target any US base in the neighboring nations.
Due to these dangers, the US is relocating non-essential staff and their dependents out of Iraq, Bahrain, and Kuwait. The US military is also keeping a close eye on the situation.
Negotiations between the US and Iran on Iran’s nuclear program have apparently stalled. A new round of negotiations was scheduled for the weekend in Oman, but now it appears they won’t take place.
One of the reasons for the price hike of oil is a US-China trade deal. President Donald Trump announced that China would supply rare earth minerals, which are crucial to technology. This created hope that demand for oil will increase as trade is improved.
Also, US oil supplies declined further than anticipated last week. The inventory of oil decreased by 3.64 million barrels. This indicates that either demand is increasing or supply is constrained.
Earlier this week, oil prices were already up since the OPEC+ group and Saudi Arabia agreed to gradually boost oil production. This was a substantial reversal compared to earlier in May when prices were down.
Analysts indicate that although global events influence oil prices, supply and demand remain the prime mover. Rystad Energy, a research organization, expects prices to remain firm due to constrained supply and effective management by oil-producing nations.
As of Thursday morning in Singapore, Brent was at $70.15 and WTI at $68.56 per barrel.
