Oil Prices Surge as Iran Tensions and Canada Wildfires Tighten Supply

SINGAPORE, June 3, 2025 - Oil prices edged higher on Tuesday, driven by mounting supply concerns and a weakening U.S. dollar, despite OPEC+ maintaining its planned production increase. Brent crude futures rose 12 cents, or 0.19%, to $64.75 per barrel, while U.S. West Texas Intermediate (WTI) crude gained 20 cents, or 0.32%, to $62.72 per barrel by 0627 GMT. The uptick follows a nearly 3% surge on Monday, fueled by geopolitical risks and a modest OPEC+ output hike that fell short of market fears, prompting investors to unwind bearish positions.

Geopolitical Risks and Supply Disruptions Drive Prices

Geopolitical tensions are bolstering oil prices, with Iran poised to reject a U.S. proposal to resolve a decades-long nuclear dispute, according to an Iranian diplomat. The failure of these talks could sustain sanctions on Iran, limiting its 3 million barrels per day (bpd) output and tightening global supply.

Additionally, wildfires in Alberta, Canada, have disrupted over 344,000 bpd of oil sands production, roughly 7% of Canada’s total crude output, further stoking supply concerns. Recent updates indicate the fires continue to threaten production, with no immediate resolution in sight, amplifying market uncertainty.

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Weaker Dollar and OPEC+ Strategy Fuel Market Dynamics

A weaker U.S. dollar, near six-week lows due to concerns over President Donald Trump’s tariff policies, has made oil more affordable for holders of other currencies, supporting price gains. Priyanka Sachdeva, senior market analyst at Phillip Nova, noted that the weakening dollar is a key driver of rising crude prices.

Meanwhile, OPEC+ agreed to increase output by 411,000 bpd in July, consistent with prior months, as it aims to reclaim market share and address overproduction by members like Kazakhstan and Iraq. Analysts from ING and ANZ suggest the market’s relief over the modest hike has contributed to the bullish sentiment, with Brent and WTI prices reflecting this optimism.

Did You Know?
Canada’s oil sands in Alberta account for about 60% of the country’s crude oil production, making wildfires in the region a significant threat to global oil supply.

Market Outlook and Global Implications

The oil market remains volatile, with prices sensitive to both supply constraints and demand uncertainties. Real-time data shows Brent trading around $65.17 and WTI at $63.1, driven by ongoing Russia-Ukraine tensions and potential U.S. sanctions on Russian oil buyers, which could further limit supply.

The International Energy Agency projects global oil demand growth of 740,000 bpd in 2025, supported by economic growth and lower prices, though electric vehicle adoption may temper this rise. As Trump’s tariff threats raise fears of economic slowdown, the balance between supply risks and demand concerns will shape oil prices in the near term.