Oil Prices Continue to Rise After Trump Threatens Iran's Trade Partners with Tariffs

SadaNews - Oil has touched its highest level since November after U.S. President Donald Trump stated he would impose a 25% tariff on goods coming from countries that "trade commercially" with Iran, following a wave of bloody unrest in the OPEC member state.

Brent crude traded near $64 a barrel after surging more than 6% over the previous three sessions, while West Texas Intermediate crude was traded below $60 a barrel.

Trump said on social media that the new tariffs would be "effective immediately" without providing details about the scope of these tariffs or how they would be enforced.

A Strong Start to the Year for Oil Prices

Oil has gained momentum at the start of the new year following a series of five monthly losses fueled by expectations of an oversupply.

This rise has come amid U.S. intervention in Venezuela, which included the arrest of President Nicolas Maduro, followed by an escalation of unrest in Iran. However, authorities in Tehran have claimed they have now managed to contain the protests.

While price movements on Tuesday were relatively limited due to a lack of clarity regarding Trump's recent decree, any new tariffs threaten to ignite a trade war with China, the largest importer of crude oil in the world and the buyer of about 90% of Iran's total exports.

Unprecedented Hedging Against Price Jumps

Currently, traders are seeking to hedge against price spikes, which drove the volumes of call options on Brent crude to an unprecedented level on Monday.

Charu Chanana, Senior Investment Strategist at Saxo Markets in Singapore, said, "The immediate effect of tariff threats on Iran may be to add a geopolitical risk premium to crude prices."

She added, "But the sustainable trend will depend on whether these statements turn into actionable policies, and whether they lead to significant supply disruptions or broader trade responses that harm demand growth."

Decline in Iranian Stocks

The prospects of disruptions to Iran's daily exports, which represent just under 2% of global demand, have eased some concerns about global oversupply.

Iranian stocks at a key export terminal have dwindled by about one-fifth since the beginning of the year, potentially indicating a transfer of crude away from danger zones amid the unrest.

Elsewhere, supplies coming from Kazakhstan are being disrupted due to bad weather, maintenance activities, and damage to Russian infrastructure caused by Ukrainian drone attacks.