Hedge funds have turned increasingly bullish on Brent crude oil, with positioning reaching its highest level since April as political unrest in Iran reintroduced a geopolitical risk premium into energy markets, according to a report by Bloomberg citing data from ICE Futures Europe.
Money managers raised their net long positions in Brent by 85,496 contracts to 208,461 lots in the week to 13 January, according to the figures – the strongest bullish stance in nine months. Long-only positioning in US benchmark West Texas Intermediate also climbed to a five-month high, Commodity Futures Trading Commission data showed.
The shift reflects growing concern over instability in Iran, OPEC’s fourth-largest oil producer, which pumps roughly 3.3 million barrels per day. Markets have been closely monitoring nationwide protests and assessing the potential risk of US involvement that could threaten supply.
Former US president Donald Trump added to market anxiety earlier in the week after warning the Iranian regime would “pay hell” if protesters were harmed, while also suggesting US citizens consider evacuating the country.
The rise in geopolitical risk has been most visible in derivatives markets. Options data showed a sharp increase in demand for bullish Brent call options, with skew at one point reaching its strongest level since last summer. Oil volatility has also picked up as traders price in potential disruption scenarios.
Trump later softened his tone in comments made after the reporting period, saying he respected Iran’s decision to halt planned executions of protesters, though uncertainty around the situation continues to support crude prices.
