Oil rises on US-Iran tensions despite supply glut

Oil prices maintain a persistent bid despite oversupply conditions, with traders pricing in escalating US-Iran tensions that could lead to military conflict. Iran has issued stern warnings that any strikes would constitute an act of war, threatening retaliation against both US and Israeli targets. However, market participants note Iran's history of tough rhetoric without follow-through action. The oil market appears to be embedding a war premium, with WTI and Brent futures showing resilience despite fundamentally bearish supply-demand dynamics. This geopolitical risk factor is supporting energy prices and could create volatility spillovers into commodity-linked currencies like CAD and NOK. Should tensions escalate into actual military engagement, oil could spike significantly higher, potentially boosting USD/CAD downside and supporting inflation concerns. Conversely, de-escalation would likely trigger a sharp correction in crude prices, removing this supportive factor for petro-currencies.