Oil Prices Surge 3.7% as U.S.-Iran Standoff Triggers Higher 2026 Forecasts

Crude Prices Spike on Geopolitical Tensions

Oil prices surged 3.7% on Friday, with West Texas Intermediate (WTI) crude climbing to $67.60 per barrel after a $2.39 gain in morning trading.

This sharp rise came as traders reacted to deepening standoff between the United States and Iran, pricing in risks of supply disruptions. Brent crude also pushed into the low $70s, marking its highest levels since late 2025. The rally extended into the weekend, reflecting fears over stalled nuclear talks and a massive U.S. military buildup in the region, the largest since the 2003 Iraq invasion.

Market participants watched closely as indirect talks in Geneva this week failed to yield progress, with Iran's Foreign Minister announcing technical teams would meet in Vienna starting Monday but political discussions remaining fraught. Prediction markets showed rising odds of a U.S. strike on Iran by early March, adding to the uncertainty.

The U.S. State Department even authorized the departure of non-emergency staff from its mission in Israel due to safety concerns, signaling heightened regional stress.

Heightened Risks Drive 2026 Price Forecasts Upward

Analysts have revised their outlooks for oil prices in 2026, citing the potential for Iranian supply interruptions. BloombergNEF now sees Brent averaging $91 per barrel in the fourth quarter if disruptions persist through the year, up sharply from a baseline of $55 assuming no major issues.

ING Think bumped its 2026 Brent forecast to $62 per barrel from $57, factoring in a $10 risk premium from geopolitical uncertainty. Even in an extreme scenario where Iran's 3.3 million barrels per day of output vanish starting now, prices could hit $71 in the second quarter.

Experts like Fereidun Fesharaki warn that $90 to $100 per barrel spikes are within reach if conflict erupts, especially with threats to key infrastructure.

"I don't think the US has a choice but to go to war... Oil prices of $90 to $100 a barrel are within reach if supply from the Middle East is disrupted," Fesharaki told Bloomberg Television, emphasizing the market's underestimation of consequences like strikes on Saudi or UAE facilities.

These forecasts come despite expectations of a global supply glut, highlighting how one major event could flip the market into deficit.

Broader Implications for Global Markets and Diplomacy

The Strait of Hormuz looms large in this crisis, with about 20% of global oil consumption passing through this narrow chokepoint daily. Any blockade could send war premiums soaring, though U.S. naval and air assets in the Gulf aim to deter such moves and protect shipping lanes.

Tensions ratcheted up further with U.S. Treasury sanctions on 12 Iranian-linked tankers, including those trading with China, as President Trump sticks to a maximum pressure campaign. His recent 10-to-15-day deadline for Iran to abandon its nuclear program adds urgency, with talks in Geneva offering little hope.

OPEC+ dynamics complicate the picture, as members mull a production hike of 137,000 barrels per day for April, potentially countering some bullish pressure from tensions. Asian buyers face steeper prices for Middle East sour crudes, with spreads widening significantly. Options markets show traders buying upside protection, with call skews spiking since early 2026.

The U.S. military's readiness for a sustained campaign underscores the stakes, yet markets so far believe large-scale disruption remains unlikely, keeping price gains contained.

In summary, the 3.7% oil price surge reflects mounting U.S.-Iran risks, elevated 2026 forecasts amid supply disruption fears, and watchful eyes on diplomacy and OPEC+ moves. While tensions simmer, the potential for volatility keeps energy markets on edge.