Oil prices hovered near seven-month highs on Wednesday as mounting geopolitical tensions between the United States and Iran stoked fears of supply disruptions, even as both sides prepared for another round of high-stakes diplomatic talks later this week.

Brent crude futures were trading at about $71.22 per barrel, up 45 cents or 0.64%, while U.S. West Texas Intermediate (WTI) futures rose 42 cents, or 0.64%, to $66.05. The gains keep both benchmarks close to levels not seen since mid-2025, underscoring the market’s heightened sensitivity to developments in the Middle East.

The rally has been driven primarily by the growing risk of military confrontation, which traders fear could disrupt oil exports from one of the world’s most critical energy corridors. The Persian Gulf – particularly the Strait of Hormuz – handles roughly a fifth of global oil consumption, making any instability in the region a major threat to global supply chains.

Brent prices reached their highest since July 31, 2025, last week, while WTI climbed to levels not seen since early August 2025. Analysts say a “geopolitical risk premium” has been priced into crude markets as investors hedge against worst-case scenarios.

The tensions come amid reports of a significant U.S. military buildup in the region and warnings from Washington that failure in nuclear negotiations could lead to stronger action against Tehran. Oil markets have historically reacted sharply to such signals, as Iran is a major producer and any disruption could ripple across global energy flows.

Adding to concerns, Iran’s position near the Strait of Hormuz gives it the ability to influence a chokepoint through which more than 20 million barrels of oil and fuel pass each day. Even the perception of risk in this corridor can trigger sharp price movements.

However, diplomatic efforts continue. U.S. and Iranian officials are scheduled to meet in Geneva on Thursday for another round of negotiations, offering a potential pathway to de-escalation. Markets remain highly reactive to any signals emerging from these talks, with previous developments causing swings of several dollars per barrel within days.

On the supply side, OPEC+ dynamics are also influencing prices. The producer group is reportedly considering a modest production increase starting in April to meet anticipated summer demand and to offset potential supply disruptions. Saudi Arabia, the world’s largest oil exporter, has also prepared contingency plans to boost output if conflict reduces regional exports.

Despite the current rally, some analysts caution that the underlying fundamentals of the oil market remain relatively balanced, with inventories not critically low and global supply still adequate. Without geopolitical tensions, Brent crude would likely be trading significantly lower, potentially in the $60–$65 range, according to market observers.