By: Economy Middle east

Oil prices held near seven-month highs on Wednesday as the market balanced the threat of military conflict between the U.S. and Iran against concerns of a global supply surplus. Brent futures rose 47 cents to $71.05 per barrel, while WTI futures climbed 44 cents to $66.07. These elevated levels reflect investor anxiety over potential supply disruptions in the Middle East, particularly as the U.S. has significantly increased its military presence in the region to pressure Tehran regarding its nuclear and ballistic missile programs.

Diplomatic efforts and strategic risks

All eyes are on Geneva, where U.S. envoys Steve Witkoff and Jared Kushner are scheduled to meet an Iranian delegation for a third round of critical talks on Thursday. While Iranian Foreign Minister Abbas Araqchi has stated that a deal is “within reach,” significant hurdles remain, including Washington’s demand for “zero enrichment” of uranium. The situation is further complicated by reports that Iran and China have accelerated discussions for the purchase of anti-ship cruise missiles, which could enhance Iran’s ability to target U.S. naval forces in the Strait of Hormuz—a chokepoint responsible for approximately 20 percent of the world’s oil flow.

Domestic policy and State of the Union

U.S. President Donald Trump addressed the nation on Tuesday evening during his State of the Union speech, where he discussed his administration’s strategy for Iran. While expressing a preference for diplomacy, he reinforced that military options remain a “serious gamble” for Tehran if a nuclear agreement fails to materialize. These political signals are being closely watched by traders as they weigh the likelihood of a localized military strike versus a comprehensive diplomatic breakthrough.

Inventory gains vs. supply concerns

Despite the geopolitical risk premium, the market is also navigating data showing a significant increase in U.S. stockpiles. The American Petroleum Institute reported a massive build of 11.43 million barrels in U.S. oil inventories for the week ended February 20. However, the bearish impact of this supply surge was partially offset by a reported decline in gasoline and distillate inventories. Market participants are now awaiting official government data from the Energy Information Administration (EIA) for a definitive view on domestic supply and demand balance.