Rising Tensions Over Iran’s Nuclear Program Drive Oil Prices Higher

Oil prices skyrocketed this week after news broke that the Israeli military was preparing for airstrikes against Iranian nuclear targets. US intelligence assessments suggest that Israel may be preparing to strike amid increasing concerns over Iran’s uranium stockpiles, which are nearing weapons-grade levels. Iran isn’t being subtle about showcasing its nuclear ambitions. Officials are warning that they will obtain a nuclear weapon if current diplomacy fails.

Iran’s Supreme Leader, Ali Khamenei, expressed skepticism about the success of the latest round of nuclear talks with the United States. This feeling is in concert with the global geopolitical environment. Iran’s nuclear plans have raised a new scare across the Middle East. Analysts are sounding alarms that an Israeli offensive strike on Iranian nuclear facilities would drastically destabilize the region. Further, such a move would completely gut hopes for long-term stability.

Despite rising sanctions imposed by the US and its allies, including Europe and the UK, Iran has managed to maintain its crude oil exports. Until very recently, the country has doggedly continued to increase its oil supply. This step would further complicate efforts to rein in its nuclear program. Following the report on Israel’s expected military offensive, US crude oil prices jumped by 1.1% to $62.7 per barrel. At the same time, Brent crude rose by 1% to $66 per barrel.

Because US officials have already made clear their concerns regarding Iran’s potential nuclear capabilities. Special envoy Steve Witkoff emphasized the importance of limiting Iran’s enrichment activities, stating, “We cannot allow even 1% of an enrichment capability.” He further articulated the US position by saying, “We’ve delivered a proposal to the Iranians that we think addresses some of this without disrespecting them.”

It’s more complicated than that. Many of Iran’s nuclear sites may already be hardened against air strikes. This raises the stakes for both Israel and the US as they consider their next moves in light of Iran’s ongoing defiance.