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On Wednesday, oil prices surged significantly after the Pentagon allowed family members of military personnel to leave certain areas in the Middle East due to escalating tensions between the US and Iran.
The international oil benchmark, Brent crude, increased by 5 percent from Tuesday’s closing, reaching $70 a barrel during New York afternoon trading. The US benchmark, West Texas Intermediate, also climbed to its highest point since April with a similar rise.
This spike in crude prices occurred shortly after Donald Trump expressed decreased confidence in reaching a nuclear agreement with Iran, even though discussions were taking place earlier this year.
Later that evening, Trump confirmed the decision to withdraw non-essential personnel from the region, stating, “They’re being moved out because it’s a dangerous place and we’ll see what happens,” to reporters.
He also emphasized, “They can’t have a nuclear weapon, very simple,” when talking about Iran.
The US has signaled it might consider military measures to prevent Iran from developing nuclear capabilities if diplomatic efforts falter. Meanwhile, Israel is pushing for military action against Iran, believing the country is currently vulnerable.
Iran’s defense minister warned on Wednesday that any attack would lead to targeting US military facilities in the region “without hesitation,” statements that unsettled energy markets.
“Crude has obviously reacted to the news coming out of the Middle East,” remarked a London-based oil broker.
The 60-day period Trump provided for Iran to agree to a new nuclear deal is set to end on Thursday. Tehran has indicated there will be a sixth round of talks on Sunday, although this has yet to be verified by the US or Oman, which is assisting in the negotiations.
According to a US defense official, the authorization for the voluntary departure of American military families from parts of the Middle East was issued by Defense Secretary Pete Hegseth.
“The safety and security of our service members and their families remains our highest priority, and US Central Command (Centcom) is closely monitoring the evolving tensions in the Middle East,” the official stated. Centcom oversees military operations in the region.
A State Department official mentioned that the US had opted to “reduce the footprint of our Mission in Iraq,” and is continually evaluating the necessary personnel presence at all embassies.
Earlier on Wednesday, the UK’s Royal Navy Maritime Trade Operations office noted heightened regional tensions that could escalate military activities affecting maritime operations.
It remains unclear what prompted the US to permit military dependents to leave voluntarily. A UK government spokesperson indicated they are not following the US lead regarding their own forces but are monitoring their situation.
The increase in Brent prices on Wednesday could be seen as an “overreaction indicating that the market is rather short on certainty and anxious,” explained Jorge Montepeque, managing director of Onyx Capital, which provides liquidity in oil derivatives. A “short” position is essentially a bet on falling oil prices.
Currently, the Trump administration is engaged in indirect talks with Iran to find a resolution regarding Tehran’s extensive nuclear program and to address a longstanding conflict with the nation.
Iran has expressed dissatisfaction with a US proposal for an interim agreement, as Trump insists on the nation giving up its domestic enrichment program.
Tehran, claiming the right to enrich uranium under the non-proliferation treaty, has indicated it will put forward a counterproposal.
Trump told The New York Post that he is “less confident now of a deal being made,” although he reiterated a preference for an agreement over military action.
Iran’s defense minister, Aziz Nasirzadeh, stated on Wednesday that “if a conflict is imposed on us… all US bases are within our reach and we will target them in host countries without hesitation.”
However, Western diplomats believe Iran is eager to avoid military conflict and seeks successful negotiations to obtain sanctions relief that could support its struggling economy.
Helima Croft, a former CIA analyst now with RBC Capital Markets, stated that the departure of non-essential US personnel is increasing geopolitical strain.
“Although this is not a full evacuation order, such decisions are not made lightly and usually follow a significant review of intelligence,” Croft noted. “This raises concerns about a heightened threat landscape in the region.”
Additional reporting by Guy Chazan in New York, Najmeh Bozorgmehr in Tehran, and David Sheppard in London
