Oil markets haven’t had a breather since the year started, lurching from one geopolitical shock to the next. The focus has now pivoted from the US military’s capture of Venezuela’s Nicolás Maduro — which briefly signaled a return of heavy crude to the market — to the ongoing upheaval in Iran. With reports that Tehran’s crackdown on nationwide protests has left over 2k dead and US President Donald Trump signaling a potential military response, the “geopolitical risk premium” has returned to oil markets.

Markets moved accordingly: Oil reached its highest level so far this year yesterday, with Brent climbing to USD 66.10 per barrel, after pausing temporarily on Tuesday as Venezuelan crude went on water. Citi also raised its near-term Brent view to some USD 70, framing the move as risk-driven, not the result of lost supply.

What to watch for: While the events in Venezuela didn’t have a meaningful impact on Brent prices, the spread between Brent and WTI is now at an eight-month high.

Why Iran matters — even now

Iran’s oil industry is no longer the giant it once was. Years of sanctions and underinvestment have capped production at some 3.3 mn bbl / d, roughly 3% of global supply. But the country still punches above its weight — not because of volumes alone, but because of where and how its oil moves.

Around 80-90% of Iranian crude exports flow to China — some 1.4-2 mn bbl / d — mostly via opaque trading networks and the so-called “dark fleet” of aging tankers. By late December, more than 50 mn bbl of Iranian crude were moving through these shadow routes — the highest level in over two years, Bloomberg cites Kpler data. Official customs data may not show Iranian barrels since mid-2022, but ship-tracking data does.

Supply is now stuck: Iran’s floating storage has climbed to some 166 mn bbl as buyers delay unloading and shipping becomes more complicated, Reuters ’ data shows.

Where the risk shows up

The spread that says more than the headline: Brent’s premium over Dubai crude widened on Tuesday to its highest level since July. For our neck of the woods, this spread is the most important “tell” in the market. When Brent carries a heavy premium, it means global traders are not chasing demand; they are hedging against a disruption in the Strait of Hormuz, the world’s most critical energy artery through which 20 mn bbl/d flows.

In effect, the market is assigning a higher value to barrels perceived as “safe” (Brent/WTI), while Middle Eastern crude — physically closer to the potential conflict — is being discounted. For regional producers, this is a double-edged sword: Crude is gaining buyers in Asia because it is cheaper, but benchmarks aren’t capturing the price upside that the “risk” should theoretically provide.

The Gulf is trying to tamp down risks: Behind the scenes, Riyadh, Muscat, and Doha haveprivately warned Washington that an attempt to topple the Iranian regime would rattle global markets beyond repair. The market is currently betting that the US will opt for surgical “risk” over a full-scale “supply disruption.”

The macro tripwire

This is where oil stops being background noise and starts behaving like a macro shock: A USD 80 / bbl world would likely trigger a synchronized global selloff, Interactive Brokers notes. That, in turn, could limit the Fed’s ability to cut interest rates, removing a key support that has lifted risk assets over the past year. That vulnerability is already there, with three consecutive years of equity gains leaving markets exposed to an oil price shock and near-term correction.

MARKETS THIS MORNING-

Asia-Pacific markets are nearly uniformly in the red in early trading, with the exception of South Korea’s Kospi index, which is up less than 1% this morning. Japan’s Nikkei snapped a brief rally that pushed it to a record high yesterday, while the Shanghai index, Hang Seng, and CSI 300 are all trading down. Wall Street looks set to open in the red again later today, extending losses after falling for a second session yesterday.

THE CLOSING BELL: TADAWUL-

The TASI rose 0.5% yesterday on turnover of SAR 6.8 bn. The index is up 4.3% YTD.

In the green: Alkhathiri (+5.8%), Wafrah (+4.5%) and Alramz (+4.4%).

In the red: Sieco (-9.7%), UCA (-5.1%) and Thimar (-4.5%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.5% yesterday on turnover of SAR 16.1 mn. The index is up 1.1% YTD.

In the green: Aictec (+7.2%), Rawasi (+7.2%) and Taqat (+7.1%).

In the red: Mulkia (-9.9%), Naas Petrol (-9.7%) and Riyadh Steel (-7.7%).

Corporate actions

Al Rajhi Bank’s board recommended a 50% capital increase to SAR 60 bn by issuing bonus shares, the bank said in a disclosure to Tadawul. The capital hike will be executed by capitalizing SAR 20 bn from retained earnings, giving shareholders one bonus share for every two owned and raising the bank’s total share count to 6 bn from 4 bn.