US-Iran tensions dominate market trends, with high risk premiums for oil prices.
2026-02-28 02:29:42
Oil prices rose significantly this week. On Friday, Brent crude rose about 2.36% to $72.67 a barrel, hitting a new high since July; WTI crude rose about 2.51% to $66.85, its highest since August. For the week, the two benchmark oil prices recorded gains of approximately 1.52% and 2.08%, respectively.
Core driver: The stalemate in US-Iran nuclear negotiations
The biggest driver of this week's market movements was the uncertainty surrounding US-Iran relations. The two sides held indirect talks in Geneva on Thursday but failed to reach an agreement. During the negotiations, oil prices surged by more than $1 in a single day after reports indicated that the US insisted Iran not enrich uranium. Subsequently, the Omani mediators stated that the negotiations had made progress, and oil prices retreated slightly, but remained at a high level overall.
Currently, follow-up technical discussions are scheduled to take place in Vienna next week. It is worth noting that Trump publicly warned on February 19 that Iran must reach an agreement on its nuclear program within 10 to 15 days, or face serious consequences; this deadline is set to expire no later than next week.
DBS analysts noted that the latest round of talks offered a glimmer of hope for a peaceful resolution, but the possibility of military strikes could not be ruled out. The market has already priced in a geopolitical risk premium of $8 to $10 per barrel for oil, primarily reflecting concerns about potential disruptions to the Strait of Hormuz (a vital waterway supplying approximately 20% of the world's oil).
Supply and demand: Fundamentals are bearish, but risk premiums are supporting prices.
From a fundamental perspective, global oil supply is expected to continue to exceed demand this year, and this oversupply should have suppressed oil prices. However, this week's EIA data showed that U.S. crude oil inventories surged by 16 million barrels to 435.8 million barrels in a single week, the largest weekly increase since February 2023, further confirming the reality of ample supply.
Nevertheless, ongoing geopolitical tensions have kept risk premiums at high levels, offsetting downward pressure on fundamentals.
Production Trends: OPEC+ Meeting Approaching
Multiple sources indicate that Abu Dhabi, UAE, plans to increase exports of its flagship Murban crude oil in April, and Saudi Arabia may also raise its official selling price for Asian crude oil in April for the first time in five months, by about $1 per barrel, partly due to rising demand from India and its intention to replace Russian supply.
Market attention is also focused on the OPEC+ meeting scheduled for March 1. It is widely expected that the organization will announce a resumption of production increases, with an initial increase of approximately 137,000 barrels per day.
Macro background
Expectations for a Federal Reserve rate cut remain, but the pace is fraught with uncertainty. Unexpectedly high US PPI data in January, indicating accelerating wholesale inflation, has made the market more cautious about the timeline for rate cuts. Furthermore, uncertainty surrounding the direction of US tariff policy continues to weigh on market sentiment following the recent Supreme Court ruling.
Next week's outlook
(WTI crude oil daily chart source: FX678)
Commerzbank analysts stated that with the deadline set by Trump for negotiations with Iran approaching, the risk of a US military strike will continue to dominate the oil market, providing strong support for oil prices. Investors will also be watching speeches by Federal Reserve officials, the manufacturing PMI, ADP employment data, and initial jobless claims to assess economic trends and the interest rate outlook.
Core driver: The stalemate in US-Iran nuclear negotiations
The biggest driver of this week's market movements was the uncertainty surrounding US-Iran relations. The two sides held indirect talks in Geneva on Thursday but failed to reach an agreement. During the negotiations, oil prices surged by more than $1 in a single day after reports indicated that the US insisted Iran not enrich uranium. Subsequently, the Omani mediators stated that the negotiations had made progress, and oil prices retreated slightly, but remained at a high level overall.
Currently, follow-up technical discussions are scheduled to take place in Vienna next week. It is worth noting that Trump publicly warned on February 19 that Iran must reach an agreement on its nuclear program within 10 to 15 days, or face serious consequences; this deadline is set to expire no later than next week.
DBS analysts noted that the latest round of talks offered a glimmer of hope for a peaceful resolution, but the possibility of military strikes could not be ruled out. The market has already priced in a geopolitical risk premium of $8 to $10 per barrel for oil, primarily reflecting concerns about potential disruptions to the Strait of Hormuz (a vital waterway supplying approximately 20% of the world's oil).
Supply and demand: Fundamentals are bearish, but risk premiums are supporting prices.
From a fundamental perspective, global oil supply is expected to continue to exceed demand this year, and this oversupply should have suppressed oil prices. However, this week's EIA data showed that U.S. crude oil inventories surged by 16 million barrels to 435.8 million barrels in a single week, the largest weekly increase since February 2023, further confirming the reality of ample supply.
Nevertheless, ongoing geopolitical tensions have kept risk premiums at high levels, offsetting downward pressure on fundamentals.
Production Trends: OPEC+ Meeting Approaching
Multiple sources indicate that Abu Dhabi, UAE, plans to increase exports of its flagship Murban crude oil in April, and Saudi Arabia may also raise its official selling price for Asian crude oil in April for the first time in five months, by about $1 per barrel, partly due to rising demand from India and its intention to replace Russian supply.
Market attention is also focused on the OPEC+ meeting scheduled for March 1. It is widely expected that the organization will announce a resumption of production increases, with an initial increase of approximately 137,000 barrels per day.
Macro background
Expectations for a Federal Reserve rate cut remain, but the pace is fraught with uncertainty. Unexpectedly high US PPI data in January, indicating accelerating wholesale inflation, has made the market more cautious about the timeline for rate cuts. Furthermore, uncertainty surrounding the direction of US tariff policy continues to weigh on market sentiment following the recent Supreme Court ruling.
Next week's outlook
(WTI crude oil daily chart source: FX678)
Commerzbank analysts stated that with the deadline set by Trump for negotiations with Iran approaching, the risk of a US military strike will continue to dominate the oil market, providing strong support for oil prices. Investors will also be watching speeches by Federal Reserve officials, the manufacturing PMI, ADP employment data, and initial jobless claims to assess economic trends and the interest rate outlook.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
