Oil Prices Surge 3% Amid Rising US-Iran Tensions

Global oil prices jumped about 3% on Wednesday to their highest level in five months, rattling energy markets and reviving fears of renewed inflation as tensions between the United States and Iran sharpened. The surge followed blunt warnings from President Donald Trump and fresh signs of US military deployments in the Middle East, fueling concerns that a direct confrontation could disrupt oil supplies from one of the world’s most sensitive regions.

Brent crude settled above $70 a barrel, its highest level since September, while US benchmark West Texas Intermediate climbed to around $66 a barrel. Analysts said the move reflected a growing “geopolitical premium” in prices, as traders reassessed risks that had largely faded in recent months.

Markets React to Escalating US-Iran Tensions

The immediate catalyst was a series of forceful public statements by President Trump, combined with reports of an expanding US naval presence near Iran.

On 28 January, Mr Trump warned on social media that “time is running out” for Tehran to strike a nuclear deal, adding: “MAKE A DEAL… the next attack will be far worse!” A day later, he referred to a “massive armada” moving toward the region and again urged Iran to negotiate an agreement centred on “NO NUCLEAR WEAPONS”.

While there has been no confirmation of imminent military action, energy markets rarely wait for certainty. Even the possibility of targeted strikes on Iranian nuclear or military facilities was enough to send prices sharply higher.

Why Iran Matters to the Oil Market

Iran sits at the heart of the global oil system, both as a producer and as a gatekeeper to the Strait of Hormuz, through which roughly a fifth of the world’s oil supply passes. Any disruption—whether through sanctions, military action, or retaliatory regional instability—can quickly ripple through global prices.

Josh Young, chief investment officer at Bison Interests, captured the market’s anxiety, saying: “The situation with Iran continues to escalate… If even a portion of Iranian supplies come off the market, that would be enough to sustain recent gains.”

Robert Yawger of Mizuho Securities went further, warning that “the timeline on a US attack on Iran appears to be drawing near,” with potential targets including military bases and Iran’s nuclear programme.

Diplomacy Struggles to Calm Markets

Behind the scenes, regional diplomacy has intensified. Gulf states have publicly distanced themselves from any military action launched from their territory, while delegations from Israel and Saudi Arabia travelled to Washington this week. Iran’s foreign minister, Abbas Araghchi, was in Istanbul for talks with Turkish officials as part of a broader effort to cool tensions.

So far, these efforts have failed to reassure traders. Many analysts now believe oil prices are carrying a $3 to $4 per barrel risk premium, which could persist unless there is a clear diplomatic breakthrough.

What It Means for Malta and Europe

For Malta, which imports nearly all of its energy needs, higher oil prices act much like a rising tide: they lift costs across the economy. Fuel prices, electricity generation costs, and shipping expenses are all sensitive to movements in crude markets.

Even if prices stabilise at current levels, the increase could feed into higher transport and logistics costs across the Mediterranean, affecting everything from public transport to imported food and consumer goods. Economists warn that sustained oil prices above $70 a barrel risk complicating the gradual easing of inflation across the euro area.

Energy analysts note that oil price movements typically take several weeks to filter through to retail fuel prices, depending on hedging strategies and existing supply contracts. But the direction of travel, they say, is clear.

A Market on Edge

By Thursday, oil prices held most of their gains, suggesting that traders remain unconvinced the crisis will fade quickly. Technical resistance levels near recent highs are now in focus, with some forecasters warning that a further escalation could push Brent toward $72 a barrel in the coming months.

For now, global energy markets are playing a familiar waiting game—poised between diplomacy and conflict, where a single decision in Washington or Tehran could again redraw the price of oil felt every day at the pump in Malta and beyond.