Morning Highlights: Oil Near Six-Month Highs, Up 5%+ Weekly as Trump Sets 10-15 Day Iran Deadline Friday, February 19, 2026

MARKET SNAPSHOT

Oil traded near six-month highs, poised for first weekly gain in three weeks on growing conflict concerns. Brent edged down $0.25 (0.35%) to $71.41/bbl, while WTI lost $0.19 (0.45%) to $66.21/bbl as of 7:00 AM EST. Over the week, Brent up 5.3%, WTI up 5.2%.

"We're waiting for a potential binary outcome if we should take Trump's words at face value," said Saxo Bank's Ole Hansen. "The market is nervous, it's going to be a wait-and-see day."

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TRUMP SETS 10-15 DAY IRAN DEADLINE

President Trump said Thursday that "really bad things" would happen if Iran does not agree to curtail its nuclear program, setting a deadline of 10 to 15 days. This is the most specific timeline Trump has given and represents a major escalation from Wednesday's White House statement expecting Tehran to respond "in a couple of weeks."

Iran, meanwhile, has planned a joint naval exercise with Russia, a local news agency reported, days after closing the Strait of Hormuz temporarily for military drills.

"Market focus has clearly shifted to escalating Middle East tensions after the failure of multiple rounds of U.S.-Iran nuclear talks, even as investors debate whether any actual disruption will materialize," said Phillip Nova's Priyanka Sachdeva.

Options Market Signal: Traders and investors ramped up purchases of call options on Brent crude in recent days, betting on higher prices, Saxo Bank analysis shows. This positioning suggests the market is bracing for potential upside rather than just hedging downside risk.

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HEADWINDS: FED AND OPEC+ SUPPLY

Fed Minutes: "Recent Fed minutes pointing to steady rates or even the risk of further hikes if inflation stays sticky could cap demand," said Sachdeva. Low interest rates are typically supportive for crude prices.

OPEC+ April Hikes: Markets also considering impact of ample supply, with talks of OPEC+ leaning towards resuming oil output increases from April.

JPMorgan Warning: "The oil surplus evident in H2 2025 continued in January and is likely to persist," said analysts Natasha Kaneva and Lyuba Savinova. "Our balances continue to project sizeable surpluses later this year," adding that output cuts of 2 million bpd would be needed to prevent excess inventory builds in 2027.

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BOTTOM LINE

Oil is ending a volatile week up 5%+ as Trump's 10-15 day Iran deadline creates the most specific and urgent timeline yet. The shift from Tuesday's "guiding principles" optimism to Wednesday's military escalation to Thursday's "really bad things" threat to Friday's hard deadline shows how quickly this situation has deteriorated. The market is now in pure wait-and-see mode for a binary outcome over the next two weeks - either a deal that removes the war premium and sends Brent back toward $65, or military strikes that could push toward $80-100+ if Iran retaliates by genuinely closing the Strait of Hormuz.

The call options positioning that Saxo Bank highlights shows sophisticated traders are betting on upside rather than just hedging, suggesting the market believes Trump's deadline is real and the strike probability is high. Eurasia Group's 65% probability by end-April estimate is looking increasingly credible as we're now inside that timeframe with a hard 10-15 day countdown.

The 9 million barrel U.S. crude draw has to be looked at and contradicts the oversupply narrative, at least temporarily. Combined with last week's 8.5M build, we're seeing extreme inventory volatility that suggests either massive export swings or significant demand variations. The draw supports the rally by demonstrating actual tightness in the physical market despite IEA's projected 3.73M bpd surplus. Although, stats are always backward looking, keep that in mind.

However, the fundamental headwinds remain substantial. JPMorgan's warning that 2 million bpd of cuts would be needed to prevent 2027 inventory builds while OPEC+ is leaning toward resuming April output hikes creates a stark contradiction. Fed minutes suggesting steady or higher rates cap demand just as supply is set to increase. The fundamental case (Goldman $54 Q4, EIA $58 annual average, Capital Economics $50 year-end) argues current $71 Brent levels are only sustainable with actual supply disruption.

Brent at $71.41 and WTI at $66.21 reflect maximum Iran war premium. The 10-15 day deadline means we'll know the outcome by early March. If Trump backs down or extends the deadline again, the premium evaporates quickly. If strikes happen and Iran closes the Strait, we're in a different price regime entirely. There's no middle ground here - it's deal or war, and the market is pricing roughly 50-50 odds based on current levels. The next two weeks will be the most consequential for oil prices since the 2022 Ukraine invasion. Position accordingly for binary outcome.