Oil markets witnessed fresh volatility midweek as geopolitical tensions and renewed tariff threats reshaped trading sentiment. Prices rose modestly, supported by escalating developments in the Middle East and Washington’s calls for stricter measures against Russian oil. However, a weak global outlook limited the gains.
Brent crude futures were up by 35 cents, or 0.53 per cent, to $66.74 a barrel in early Wednesday trading. US West Texas Intermediate futures also added 36 cents, or 0.57 per cent, to reach $62.99 a barrel, reported Reuters.
Both benchmarks had risen by around 0.6 per cent in the prior session, reacting to Israel’s announcement that it had targeted Hamas leadership in Doha. Qatar’s prime minister later warned that the attack jeopardised ongoing peace negotiations between Israel and Hamas.
Initial oil price gains of nearly 2 per cent immediately after the incident were pared back when Washington assured Doha that no similar events would be allowed on its territory in the future. This helped to calm markets, though analysts noted that the response remained muted given the scale of the development.
Tariff Threats Add to Uncertainty
Beyond the Middle East, traders turned their attention to Washington. US President Donald Trump urged European allies to implement tariffs on Russian oil purchases. According to sources, he has also floated the idea of extending 100 per cent tariffs on China and India, both major consumers of Russian crude.
China and India have been central buyers of discounted Russian oil since Western sanctions took hold in 2022, providing Moscow with a critical financial lifeline. Expanding punitive measures to such large markets could tighten Russian export flows and reduce global supply, a dynamic that would typically support higher prices. Yet analysts at LSEG cautioned that the White House’s appetite for aggressive action may clash with efforts to control inflation and guide the Federal Reserve towards interest rate cuts.
Market Fundamentals Remain Weak
Despite the geopolitical backdrop, the structural outlook for oil remains subdued. Inventories are rising, and OPEC+ has signalled further supply increases. The US Energy Information Administration has forecast continued pressure on global crude prices in the months ahead.
Tony Sycamore, analyst at IG Markets, said: “The modest reaction in crude oil prices to this news, along with scepticism regarding US President Trump’s claims about potentially ramping up sanctions on Russian oil … leaves crude oil vulnerable to lower prices.”
Traders are also awaiting the Federal Reserve’s policy meeting next week. Should interest rates be cut, economic activity could receive a boost, potentially lifting demand for oil. Still, market watchers emphasise that fundamentals of oversupply and uneven demand recovery remain dominant drivers.
Geopolitical Shocks vs Economic Reality
The latest developments underscore the tension between political flashpoints and the underlying weaknesses of the oil market. While attacks and tariff threats can trigger sharp short-term moves, analysts suggest that without stronger demand signals or significant supply disruption, crude benchmarks are likely to remain under pressure.
