Oil rises to highest since April on news of US embassy evacuation in Iraq

An unexpected spike in geopolitical tensions in the Middle East drove oil prices up more than 4% on June 11, to their highest level in two months. Traders reacted to the news of the US plans to evacuate the embassy in Iraq due to increased security threats related to the potential failure of negotiations on a nuclear deal with Iran;

-  Brent crude futures rose 4.3% to $69.8 a barrel on June 11, the highest price since early April.

- U.S. WTI crude added 4.9%, reaching $68.2 per barrel. This is also the maximum cost since April.

Surprised traders began buying oil futures after reporting that the U.S. was preparing to partially evacuate its embassy in Iraq due to increased security threats in the Middle East. The White House said the decision «was based on a recent assessment» of the situation.

«The market didn't expect such a major geopolitical risk,» Price Futures Group analyst Phil Flynn told Reuters.

Earlier, Iranian Defense Minister Aziz Nasirzadeh said Tehran would strike US bases in the region if nuclear deal talks fail and the conflict with the US escalates. For his part, U.S. President Donald Trump, in an interview with Pod Force One podcast on Wednesday, said that he had become less confident that Iran would agree to stop enriching uranium as part of an agreement with Washington.

Ongoing tensions with Iran mean that Iranian oil supplies are likely to remain limited due to sanctions, states Reuters.

Oil supply in the market will continue to grow as OPEC+ plans to increase production by 411,000 bpd in July. «Rising demand for oil within OPEC+ countries, especially in Saudi Arabia, could offset the additional supply in the coming months and support prices,» Capital Economics analyst Hamad Hussein said in a note cited by Reuters.

Quotes were also supported by news of a trade agreement between the U.S. and China that could boost energy demand in the world's two largest economies, the agency said. Trump announced on Wednesday that China has tentatively agreed to supply the U.S. with rare earth metals and Washington will allow Chinese students into U.S. colleges and universities. The trade risk that had previously pressured oil prices has been temporarily removed, although market reaction has been subdued as it is unclear how this will affect economic growth and global oil demand, noted PVM analyst Tamás Varga.

U.S. crude oil inventories fell by 3.6 million barrels to 432.4 million, the Energy Information Administration said. However, a Reuters poll showed that the market had expected a decline of only 2 million barrels.

«It's a bullish report,» Bob Yager, director of energy futures trading at Mizuho, explained to the agency, adding that gasoline demand has started to pick up.

Gasoline supplies to the market, which are considered an indicator of consumer demand, rose by about 907,000 bpd to 9.17 million bpd over the week.

The U.S. consumer price index in May increased significantly, reinforcing expectations among financial market participants that the Federal Reserve will start cutting rates by September. Lower interest rates help economic growth and increase demand for oil.

The agency S&P Global Commodity Insights on June 9, before geopolitical tensions escalated, reduced its average forecast for the cost of Brent this year from $72 to $63. Analysts estimate that at some point the price could also fall into the $40-49 range. American oil WTI, which traditionally trades cheaper than Brent, may also be in this corridor, they believe.

S&P Global explains that OPEC+ is actively increasing production at the very moment when demand growth starts to slow down. In the second half of 2025, global oil production will grow by 2.2 million barrels per day, while demand will increase by only 390,000 barrels. This year could be the weakest in terms of demand growth since 2001, barring a pandemic and the financial crisis.

«Oil prices have no defense right now,» S&P Global said in a note. According to the agency, the season of summer road trips may support prices for a while, but then an oversupply of oil will pour into the market if there is no change of course in production.