Brent hits 6-month high; will $5–$10 war premium push prices higher? Peter McGuire answers

Brent crude has surged back to the $70 per barrel mark, hitting six-and-a-half-month highs and catching markets off guard. The rally comes despite earlier concerns of a supply glut, as escalating geopolitical tensions have injected a fresh “war premium” into global oil prices.

Peter McGuire, CEO of Australia-Trading.com, says the sharp rebound has surprised many who were positioned for softer prices amid oversupply fears.

“Absolutely, it has hit everyone by surprise,” McGuire said. “But we cannot discount the geopolitical premium being built into price. Tensions around Russia-Ukraine and ongoing friction involving Iran and the US are adding heat to the market.”

Strait of Hormuz: The key flashpoint

The biggest risk hanging over crude markets is the possibility of disruption in the Strait of Hormuz — a critical artery through which nearly a third of the world’s oil flows.

According to McGuire, any move by Iran to restrict or threaten shipping through the Strait would have immediate and severe consequences.

“If Iran were to severely crimp or shut the Strait of Hormuz, Asia would be the biggest casualty — particularly China,” he said. “That would create enormous pressure not just regionally but across the global consumption chain.”

China, heavily reliant on Middle Eastern crude, could play a stabilising role. McGuire expects Beijing to exert pressure to avoid any extreme escalation that could disrupt energy flows.

However, the situation remains fluid. “This is brinkmanship. Whether it materialises is still a work in progress,” he added.

War premium vs supply glut

Before this geopolitical flare-up, oil markets were focused on oversupply concerns, including increased output from producers and weaker global demand projections. That bearish narrative has now taken a back seat.

McGuire says the balance currently tilts toward supply disruption fears.

“If geopolitics escalates, you can quickly add $5 to $10 per barrel as a war premium,” he noted. “Markets will react swiftly to any sign of military action or shipping disruption.”

However, if tensions cool and the war premium fades, crude could retrace sharply.

“In a perfect world where geopolitical risk dissipates, Brent could move back to the low $60s or even high $50s. WTI could trade in the mid-$50s,” he said.

Russia-Ukraine adds to the heat

Apart from Iran, the ongoing Russia-Ukraine conflict continues to act as a supporting factor for oil prices. While the conflict has stabilised in some respects, any renewed escalation could push prices higher again.

“As long as the Russia-Ukraine situation remains unresolved, there is a background layer of risk premium embedded in oil,” McGuire explained.

What lies ahead?

Oil’s next move hinges on how geopolitical risks unfold over the coming weeks. Markets will closely monitor developments involving Tehran, Washington and Beijing.

For now, the crude complex remains highly sensitive to headlines.

“Things can escalate very quickly in oil markets,” McGuire warned. “No one has a crystal ball unless you’re inside the administration in Washington or Tehran.”

With supply disruption fears overshadowing earlier glut concerns, volatility in oil prices is likely to remain elevated — keeping energy markets on edge.