Oil prices rallied Friday as President Donald Trump announced that a U.S. "armada" is heading toward Iran, stoking fears of potential supply disruptions from one of OPEC's largest producers.
Brent crude futures climbed to $65.88 per barrel, up about 1.8% on the day. West Texas Intermediate rose to $61.07. Both benchmarks are set for weekly gains of roughly 2.5%.
Trump's warning
Speaking to reporters aboard Air Force One on Thursday, Trump said the U.S. has "a big flotilla going in that direction" toward Iran. He added that he hoped not to use it but renewed warnings to Tehran against killing protesters or restarting its nuclear program.
U.S. officials confirmed that warships including an aircraft carrier and guided missile destroyers will arrive in the Middle East in coming days.
Iran produces about 3.2 million barrels of oil per day and ranks as OPEC's fourth-largest producer. The country holds the world's third-largest proven oil reserves at roughly 209 billion barrels.
Kazakhstan adds to supply concerns
The Iran tensions come as Kazakhstan's giant Tengiz oilfield remains shut following a fire at a power station on January 18. The Chevron-led field, which produces about 360,000 barrels per day, could stay offline for another 7-10 days.
Tengiz accounts for more than 40% of Kazakhstan's oil output. Operator Tengizchevroil has declared force majeure and cancelled five export cargoes totaling 600,000 to 700,000 metric tons.
Oversupply still looms
The price gains come despite persistent oversupply concerns. U.S. crude inventories rose by 3.6 million barrels in the week ending January 21, the Energy Information Administration reported. Stockpiles now stand at 426 million barrels.
The EIA expects global oil inventory builds to average 2.8 million barrels per day in 2026, keeping downward pressure on prices through the year. The agency forecasts Brent will average around $55 per barrel by the first quarter.
For now, geopolitical risk is outweighing bearish fundamentals. Traders will watch for any escalation between Washington and Tehran, along with updates on when Tengiz production might resume.