Global crude oil prices stabilised on Tuesday, pausing after the sharpest four-day rally since October, as a combination of easing US-China trade tensions, a hawkish stance by US President Donald Trump on Iran, and market data on US inventories shaped sentiment.

Sharp Rally Follows Renewed Geopolitical and Economic Optimism

West Texas Intermediate (WTI), the US benchmark, traded above $63 per barrel, maintaining gains of nearly 10% over the last four sessions. Meanwhile, Brent crude, the global benchmark, closed just shy of $67 per barrel.

The rally was largely triggered by optimism surrounding trade talks between the United States and China, which had seen escalating tensions earlier but are now showing signs of thawing. Additionally, lower-than-expected US inflation data buoyed investor sentiment, hinting at potential policy support from the Federal Reserve if economic challenges persist.

Trump’s Threats on Iranian Oil Add to Upward Momentum

President Donald Trump, during his recent visit to Saudi Arabia, declared that the United States would apply maximum pressure on Iran’s oil exports if Tehran fails to meet the terms of an agreement on its nuclear programme.

This came shortly after the US State Department imposed sanctions on a network alleged to be assisting Iran in shipping oil to China, which is one of the largest buyers of Iranian crude. These developments have reinforced fears of supply disruptions in the global oil market, especially given Iran’s significant role in OPEC.

Geopolitical instability in the Middle East, historically, has been a potent driver of crude prices, and Trump’s rhetoric signals a potentially longer confrontation with Tehran, which could tighten supplies if sanctions are intensified further.

Oil Inventories Rise Sharply, Tempering Bullish Sentiment

Despite the surge in prices, some bearish data has surfaced. The American Petroleum Institute (API) reported that US crude inventories rose by 4.29 million barrels last week — the biggest weekly gain since March, if confirmed by official government data later on Wednesday.

This inventory build-up suggests that while geopolitical and macroeconomic factors are supporting prices, the underlying supply-demand fundamentals still indicate a well-supplied market, especially from US shale producers.

The news of increased stockpiles could pose a challenge to the current bullish momentum if sustained in coming weeks. Analysts caution that such inventory builds often precede downward corrections in crude prices.

Prices Still Down Year-To-Date Despite Recent Gains

Even after this recent rally, crude oil prices are still more than 10% lower in 2025 compared to the beginning of the year. Prices had hit a four-year low on a closing basis just a week ago, underscoring the volatility and fragility of the oil market amid uncertain macroeconomic indicators and demand patterns.

Investor sentiment in the energy space continues to remain cautious, particularly as global economic growth concerns linger and demand from China remains inconsistent.

Outlook Remains Cautious Amid Mixed Signals

The current rally in oil prices is driven more by sentiment and geopolitical risk premiums than by strong demand fundamentals. Analysts warn that the durability of this rebound will depend on several key factors in the coming weeks:

• Whether the US-Iran tensions escalate into actual supply disruptions.

• How China’s crude oil import demand evolves, especially with ongoing internal economic challenges.

• The direction of US Federal Reserve policy, given inflation and employment data trends.

• The outcome of OPEC+ decisions on production quotas in their upcoming meeting.

Conclusion

In summary, the oil market finds itself at a crossroads. While strong geopolitical developments and easing trade tensions have fueled a notable rebound, underlying data such as rising US inventories and fragile global demand raise questions about the sustainability of these gains.

Investors, traders, and policymakers alike will closely watch upcoming data and diplomatic moves, particularly official US inventory reports and any further comments from the White House regarding Iran.

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