Oil prices rose sharply in recent sessions as geopolitical tensions escalated between the United States and Iran, with traders reacting to the deployment of a U.S. naval group to the region. At 06:15 ET (11:15 GMT), Brent futures for March were trading 2.1% higher at $68.75 a barrel, having reached $70.35 a barrel earlier in the session - a level not seen since late September. West Texas Intermediate futures also climbed 2.1% to $64.52 a barrel, after earlier topping $65, marking a four-month high.
Market moves followed reports that the U.S. administration has stepped up pressure on Tehran over its nuclear activities. U.S. officials are said to be weighing a range of options, including targeted strikes on security forces and leaders, intended to bolster domestic protest movements and potentially bring down the country's leadership, according to Reuters, which cited U.S. sources familiar with the discussions.
Despite the buildup of naval assets and public rhetoric, Kepler Cheuvreux analysts signalled limited concern for sustained supply interruptions from Iran. In a note dated Jan. 29, the bank said its assessment is that the U.S. objective remains narrowly focused on securing a nuclear agreement with Iran rather than pursuing regime change. Because of that strategic framing, Kepler considers a broad U.S. bombing campaign unlikely.
Kepler argued that an operation specifically targeting Supreme Leader Ali Khamenei would be conceivable only under narrowly defined and highly demanding preconditions. Those would include strong prior indications that more moderate clerics would withdraw support from the Supreme Leader, together with exceptionally reliable intelligence pinpointing his exact location at the time of any strike, the bank said.
Given those constraints, analysts suggested that alternative measures could focus on disrupting Iran's ability to export oil at points outside the Persian Gulf. The note highlighted that Iran's most powerful economic actors in the oil trade are linked to the Islamic Revolutionary Guard Corps (IRGC), and that crude revenues flow directly into paying more than 150,000 members of the Revolutionary Guards. That structure, Kepler said, may incentivize pressure aimed at export logistics rather than broad military strikes.
The possibility of a closure or major disruption of the Strait of Hormuz remains, in Kepler’s view, a remote scenario. The bank emphasised that this would be a red line Iran would likely avoid crossing, not least because China is identified as its only remaining customer accepting seaborne deliveries.
Kepler also noted that markets have seen similar episodes before, referencing prior June tensions. The bank expects any oil price spike to be transitory - a matter of a couple of weeks in their view - pointing out that Brent was trading close to $60 a barrel in December before a series of intervening events pushed prices higher.
On the basis of this outlook, Kepler advised investors to consider tactical selling in the oil and gas sector should prices strengthen further from current levels. The bank’s guidance reflects its view that short-lived supply scares, rather than sustained physical shortages, are the primary near-term risk to market participants.
Market context and takeaways:
- Oil benchmarks reached multi-month highs amid heightened U.S.-Iran tensions and the presence of U.S. naval forces in the region.
- Kepler Cheuvreux judges a broad military campaign against Iran unlikely, viewing Washington's main objective as securing a nuclear deal rather than pursuing regime change.
- The IRGC’s control over exports and revenues linked to Revolutionary Guard salaries suggest targeted pressure on tanker movements could be a more plausible lever than attacks that would risk closing the Strait of Hormuz.