Oil prices surge to six-month highs after Trump's warning to Iran

• Brent crude futures traded near $71.53 per barrel and WTI near $66.30, both at six-month highs, as markets monitor supply risks from potential U.S.-Iran military conflict
• Trump gave Iran a 10-15 day deadline for a nuclear deal, with reports suggesting the White House has military action plans in place as soon as this weekend
• Barclays strategists expect any conflict to be 'short lived' and time-limited, noting the administration's focus on midterm elections and keeping prices affordable for U.S. consumers

Market Summary: Oil Prices Surge on Iran Tensions

Key Price Movements:

Oil prices reached six-month highs on Friday, with Brent crude futures trading at $71.53 per barrel and WTI futures at $66.30, though both retreated 0.2% from earlier gains after recording their highest settlements in six months.

Critical Developments:

President Trump issued an ultimatum to Iran, demanding a meaningful deal on its nuclear program within "10 to 15 days" or face "really bad things." This follows failed negotiations in Switzerland where Washington accused Tehran of not addressing core U.S. demands. Reports suggest the White House is considering fresh military action as soon as this weekend, with former U.S. Ambassador Daniel Shapiro noting "everything is in place" for strikes by Saturday night.

Geopolitical Context:

Iran conducted military drills in the strategically vital Strait of Hormuz and joint naval exercises with Russia in the Gulf of Oman. Tehran warned it will respond "decisively" to any military aggression. Trump referenced prior strikes from June last year that "decimated" Iran's nuclear potential but suggested further action may be necessary.

Market Analysis:

Barclays strategists believe any conflict would likely be "short lived" given upcoming midterm elections and the administration's focus on consumer affordability. Morgan Stanley's Martijn Rats identified three factors supporting prices: Iran concerns, Chinese stockpiling, and high freight rates. Despite geopolitical tensions, analysts note the global oil market remains "very well supplied."

Sector Impact:

Energy market participants continue monitoring supply risks in the oil-rich Middle East, though equity markets have largely dismissed the geopolitical noise thus far.