Sopuruchi Onwuka

Oil prices surged to around $71.50 per barrel on Thursday, the highest level since late September, as markets rapidly priced in the growing risk of direct US military action against Iran.

Analysts say the speed of the rally points to a clear return of a geopolitical risk premium, with traders increasingly convinced that recent US warnings carry a real probability of near-term action.

According to Rystad Energy, the pace of the move itself is a signal.

“The speed of the oil price reaction indicates that markets now see US military action against Iran as a real, near-term risk,” the consultancy said, adding that “the magnitude of the price move points to a renewed geopolitical risk premium.”

Oil markets have added roughly $4.3 per barrel in just a few days, a move that closely mirrors — and slightly exceeds — the price behaviour seen ahead of last year’s 12-day conflict involving the US, Israel and Iran. In that episode, crude rose by about $3.7 per barrel in the two days preceding US strikes on Iranian nuclear facilities.

While domestic pressure on Iran’s leadership has eased following a security crackdown that curtailed weeks of protests, external pressure from Washington has intensified sharply.

On 28 January, US President Donald Trump said a US naval armada in the region, led by the USS Abraham Lincoln, was prepared to act “with speed and violence, if necessary,” while warning that time was running out for Iran to accept a new nuclear agreement.

Energy analysts note that markets are treating these statements differently from past rhetoric.

“Traders are drawing a clear distinction between trade threats, which have often been delayed or diluted, and military threats, where this administration has shown a willingness to follow through,” said one senior energy strategist at a European investment bank. “That history matters for pricing.”

Those concerns have been reinforced by precedent. In June last year, US threats against Iran culminated in direct strikes on nuclear and military assets — an unprecedented escalation. In December, following public accusations of systematic killings of Christians in Nigeria, the US launched strikes on ISIS targets in the country. More recently, Venezuelan President Nicolás Maduro was captured and extradited after weeks of rising external pressure.

“These episodes have conditioned the market to assume that warnings are not just messaging,” said a Middle East risk analyst. “When oil traders see US assets moving into position, they act first and ask questions later.”

Not all of the price increase can be attributed to geopolitics alone. A cold snap across parts of the US has disrupted domestic oil production and logistics, particularly in weather-sensitive basins and pipeline infrastructure.

This weather-related tightening has amplified the market response, making it harder to isolate the pure geopolitical premium embedded in prices.

“Cold weather has reduced near-term supply flexibility in the US,” said an analyst at a US commodities research firm. “That doesn’t explain the entire move, but it has clearly added fuel to an already nervous market.”

Even after accounting for weather effects, analysts say the remaining upside reflects a clear reassessment of geopolitical risk.

The current price trajectory closely resembles past episodes where the threat — rather than the reality — of conflict drove prices higher.

“What we’re seeing is classic risk repricing,” said an oil market strategist. “The market doesn’t wait for missiles to fly. It moves when the probability of disruption crosses a threshold, and right now that threshold appears to have been crossed.”

With Iran sitting near critical supply routes and the Strait of Hormuz remaining a persistent vulnerability for global oil flows, traders are expected to remain highly sensitive to headlines in the coming days.

For now, analysts warn that volatility is likely to stay elevated.

“As long as the risk of escalation remains unresolved, oil prices will carry a geopolitical premium,” Rystad Energy said. “The key question is not whether markets are overreacting, but whether they are reacting fast enough.”