Oil Prices Hit Seven-Month Highs as US-Iran Tensions Escalate

Oil prices have surged to a seven-month high, with Brent crude rising above $71 per barrel, driven primarily by escalating tensions between the United States and Iran that have added a $3 to $4 per barrel risk premium to global oil markets.

The price surge comes as OPEC+ member countries, including Iraq, reaffirmed their decision to pause planned production increases for March 2026. The move was confirmed during a February 1 virtual meeting of eight member nations — Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman.

The producers cited steady global economic conditions, low inventories, and seasonal factors as reasons to maintain current output levels and preserve market balance. Production quotas remain unchanged from December 2025 levels, with Iraq maintaining output at 4.273 million barrels per day.

This follows previous production increases of 137,000 barrels per day implemented in late 2025. Sources indicate OPEC+ may consider a similar increase for April 2026 as part of a gradual unwinding of voluntary cuts totalling up to 2.2 million barrels per day implemented between 2023 and 2024.

In a related development, Chevron signed an initial deal on February 23, 2026 to develop Iraq's West Qurna 2 oilfield, which holds 14 billion barrels in recoverable reserves and currently produces between 460,000 and 480,000 barrels per day — approximately 9 per cent of Iraq's total crude output.

The agreement, overseen by Iraqi Prime Minister Mohammed Shia Al Sudani and U.S. officials including Tom Barrack, comes amid American sanctions pressuring Russia's Lukoil to exit the project.

Looking ahead, analysts predict further price rises depending on geopolitical developments. Barclays has forecast prices could reach $80 per barrel if the U.S. targets Iranian leadership, whilst Rystad Energy predicts a temporary $10 to $15 spike in the event of limited conflict.

A worst-case scenario involving direct hits on oil infrastructure could push prices above $100 per barrel, particularly given threats to the Strait of Hormuz through which 20 to 30 per cent of global seaborne oil flows.