Oil prices spiked sharply on Wednesday following a report suggesting that Israel may be preparing for a military strike against Iranian nuclear sites. The report, aired by CNN and citing unnamed US intelligence sources, triggered an immediate reaction in global energy markets.
Brent crude rose above $66 a barrel, while West Texas Intermediate (WTI) saw an increase of up to 3.5% before stabilizing later. Although the report did not confirm that Israeli leaders had made a final decision to proceed with the strike, the possibility of military action heightened concerns about the stability of the Middle East—a region responsible for nearly a third of the world’s oil supply.
The geopolitical tension comes at a time when oil markets are already navigating a period of uncertainty. Ongoing nuclear talks between the US and Iran have sent mixed signals to investors. While progress in negotiations could eventually lead to the lifting of sanctions on Iran and an increase in oil supply, any military escalation would likely delay such developments and further tighten the market.
Analysts have pointed out that the latest intelligence leak underscores the high stakes involved in US-Iran diplomatic efforts. Robert Rennie, head of commodity and carbon research at Westpac Banking Corp., said this was the clearest sign yet of the lengths to which Israel may go if it perceives Iran as unwilling to curb its nuclear ambitions. He noted that oil prices will continue to carry a risk premium as long as diplomatic outcomes remain uncertain.
The CNN report also had a brief impact on global currency markets, with traditional safe-haven currencies like the Swiss franc and Japanese yen rising momentarily before paring their gains.
Meanwhile, key US agencies such as the Department of Defense and the National Security Council declined to comment on the report. The Israeli embassy in Washington also offered no statement.
Earlier this week, Iran’s Supreme Leader Ayatollah Ali Khamenei expressed skepticism about the outcome of ongoing nuclear talks with the United States, signaling doubts over any forthcoming resolution. Such comments have only added to the uncertainty hanging over the region’s future.
On the supply side, despite facing mounting sanctions from the US and its allies, Iran has continued to export crude oil. According to Goldman Sachs, Tehran has recently increased its oil supply by nearly one million barrels per day. Samantha Dart, co-head of global commodities research at Goldman Sachs, noted that if this supply were suddenly removed due to heightened conflict, it could push crude prices up by $8 per barrel.
However, the reverse is also possible. Should the US and Iran reach a deal and lift sanctions, WTI prices could fall significantly. Bloomberg Intelligence estimates that prices could drop to as low as $40 a barrel if Iranian oil returns to global markets in large volumes.
The coming days are likely to remain volatile as investors watch for signals on both military movements and diplomatic developments. For now, the market’s reaction shows how quickly geopolitical concerns can shake investor confidence and drive up energy costs.
