Oil prices extended their rally for the third consecutive day as escalating protests in Iran raised concerns about potential supply disruptions from one of OPEC's key producers. The geopolitical tensions in the Middle East region have prompted investors to reassess supply risk scenarios, leading to increased buying activity in crude oil markets.

Price Movement and Market Response

Brent crude oil, the international benchmark, climbed to $63.89 per barrel, while West Texas Intermediate (WTI), the US benchmark, reached $59.65 per barrel. The price increases reflect growing market anxiety about potential supply shortfalls from major oil-producing regions.

Iran's Strategic Position in Global Oil Markets

Iran holds significant importance in global oil supply chains as OPEC's fourth-largest producer. The escalating protests within the country have heightened market concerns about potential disruptions to oil production and export capabilities. Any significant reduction in Iranian oil output could create supply tightness in global markets, particularly given the country's substantial production capacity.

Investment Fund Activity and Market Sentiment

Investment funds have been actively boosting their bullish positions in oil markets, reflecting increased confidence in higher prices ahead. This positioning is driven by multiple supply risk factors, including the ongoing situation in Iran and persistent concerns about Venezuela's oil production challenges.

Regional Supply Risk Assessment

The current market dynamics highlight the vulnerability of global oil supply to geopolitical tensions in key producing regions. Middle East disruptions, combined with Venezuela's production issues, have created a risk premium in oil prices as traders factor in potential supply shortfalls from these critical sources.

The sustained three-day rally demonstrates market sensitivity to geopolitical developments and underscores the importance of stable production from major OPEC members in maintaining global energy security.

Oil prices surged approximately 2% on Friday as global markets grappled with mounting supply concerns stemming from geopolitical tensions in major oil-producing regions. The rally came amid intensifying civil unrest in Iran and escalating military actions in the Russia-Ukraine conflict, prompting traders to reassess supply security.

Price Performance and Market Movement

Crude oil benchmarks posted significant gains across the board, building on Thursday's strong performance.

Both benchmarks had climbed more than 3% on Thursday, following two consecutive days of declines. The weekly performance reflects growing market anxiety over potential supply disruptions.

Iran Protests Drive Supply Concerns

Civil unrest in Iran emerged as a primary catalyst for oil price gains, with analysts expressing growing concern over potential production disruptions. Phil Flynn, senior analyst with the Price Futures Group, noted that "the uprising in Iran is keeping the market on edge."

The protests have spread across multiple Iranian cities, including:

• Capital city Tehran
• Major commercial center Mashhad
• Historic city of Isfahan
• Various other regions nationwide

A nationwide internet blackout was reported on Thursday as demonstrations over economic hardships continued to intensify. Ole Hansen, head of commodity analysis at Saxo Bank, observed that "Iran protests seem to be gathering momentum, leading the market to worry about disruptions."

OPEC Production and Regional Developments

Recent production data revealed declining output from key OPEC members. The Organization of the Petroleum Exporting Countries pumped 28.40 million barrels per day last month, representing a decrease of 100,000 bpd from November's revised total. Iran and Venezuela posted the largest production declines among member nations.

Russia-Ukraine Conflict Escalation

Concerns about supply disruptions intensified following escalated military actions in the Russia-Ukraine conflict. The Russian military confirmed firing its hypersonic Oreshnik missile at Ukrainian targets on Friday, specifically targeting energy infrastructure supporting Ukraine's military-industrial complex according to the Russian defense ministry.

Venezuelan Oil Deals in Focus

The White House scheduled meetings with oil companies and trading houses Friday afternoon to discuss Venezuelan export arrangements. Following Washington's capture of Venezuelan leader Nicolas Maduro on Saturday, President Trump has demanded full U.S. access to Venezuela's oil sector.

Tina Teng, market strategist at Moomoo ANZ, indicated that "the market will focus on the outcome in the coming days for how the Venezuelan oil in storage will be sold and delivered."

Market Outlook and Production Indicators

Despite supply concerns, analysts noted that global oil inventories continue rising, with oversupply remaining a key factor that could limit price gains. Haitong Futures suggested that unless risks around Iran escalate further, the current rebound may prove limited and difficult to sustain.

U.S. drilling activity showed continued decline, with the oil and gas rig count falling by two to 544 this week according to Baker Hughes. This represents the lowest level since mid-December and serves as an early indicator of future domestic output trends.