A recent rally in oil prices to multi-year highs is about much more than the deepening crisis in Syria, analysts told CNBC Thursday.
Crude futures soared to highs not seen since December 2014 on Wednesday, underpinned by greater geopolitical uncertainty in the Middle East and heightened concerns over the prospect of imminent military action from Western powers. Ample crude supplies had pared some of the gains on Thursday, though crude futures remained in touching distance of levels not seen in more than three years.
"I think certainly some of what we are seeing is a little bit of geopolitical premium (but) I don't think it is just about Syria," Richard Mallinson, geopolitical analyst at Energy Aspects, told CNBC's "Street Signs" Thursday.
Instead, Mallinson argued crude futures had soared to multi-year highs on the back of two main price drivers — concern over the "wider ramifications" of heightened geopolitical tension in the Middle East and the looming prospect of the U.S. withdrawing from the Iran nuclear deal.
Oil prices slipped away from 2018 highs on Thursday, with global benchmark Brent trading at $71.15 in early afternoon deals, down 0.8 percent, and WTI trading at $66.38, around 0.6 percent lower.
World leaders continue to weigh up military action in response to a suspected poison gas attack in Syria over the weekend. The prospect of a military escalation in Syria comes after members of the United Nations Security Council failed to agree on a concerted international response on Tuesday.
Shortly after the alleged chemical attack on the last rebel-held town in the Eastern Ghouta region of Syria, President Donald Trump blamed Russia President Vladimir Putin and Iran for their respective roles in providing support to the Syrian government.
Rescue workers and medics working in Syria said more than 40 people were killed after bombs filled with toxic chemicals were dropped by government forces in the war-torn country. Moscow, Tehran and Damascus have all denied responsibility for the attack.
In a tweet on Sunday, Trump said those deemed responsible should expect to pay a "big price." He has since sought to dial back threats of military action, saying missile strikes into Syria may not happen soon.
Energy Aspects' Mallinson said Trump's reference to Iran could be viewed as further evidence the U.S. president is not likely to renew the Iranian nuclear agreement.
"It's another signal that he's probably minded not to renew those sanctions next month," he added.
The Iranian nuclear deal, formerly known as the Joint Comprehensive Plan of Action (JCPOA), was struck in 2015 between Iran and China, the U.S., U.K., Russia, France and Germany. It is designed to limit Tehran's nuclear program in return for the lifting of economic sanctions.
Nonetheless, Trump has repeatedly criticized the deal and is widely expected to pull out on May 12 — the next deadline by which he has to either waiver sanctions against Iran or scrap the agreement.
"The nuclear agreement with Iran is already in the ER (emergency room). It is very difficult not to see Trump move in a direction where he pushes the U.S. to withdraw from the nuclear agreement. (That's) very meaningful for oil markets and very meaningful for geopolitical stability in the Middle East," Ayham Kamel, head of Eurasia Group's Middle East and North Africa practice, told CNBC's "Street Signs" Thursday.
— CNBC's Holly Ellyatt contributed to this report.