Global Oil Surge Geopolitical Risks and U.S. Inventory Plunge Drive Prices to 6-Month Highs.

Oil Market Volatility: WTI and Brent Hit 6-Month Highs Amid Geopolitical Tensions and Supply Shocks

Over the past week, the global oil market has surged into a state of heightened tension. Prices for WTI and Brent crude have soared to their highest levels in over six months, driven by escalating geopolitical conflicts and a larger-than-expected draw in oil inventories.

The "Geopolitical Premium": Tensions in the Middle East

The primary catalyst driving this week’s price hike is the "War Risk" premium following increased military movements between the U.S. and Iran. Rumors of strategic strikes have ignited fears of a potential blockade at the Strait of Hormuz. Given that over 20% of the world’s oil supply passes through this vital artery, any disruption could lead to a massive supply shock.

Unexpected Inventory Drawdown

Fresh data from the U.S. Energy Information Administration (EIA) shocked the market this week. U.S. crude oil stockpiles plummeted by 9 million barrels, defying analyst expectations of a 2 million-barrel increase. This tighten-up in supply was further exacerbated by a slight slowdown in U.S. production caused by recent winter storms in key oil-producing regions.

Price Forecast and The "Trump Tax" Void

While WTI is currently hovering around $66.50 and Brent has broken past $71, analysts from the EIA and IEA predict that prices could test the $70–$75 resistance levels if Middle Eastern tensions persist. However, long-term projections for late 2026 suggest a cooling down toward an average of $58 (Brent) due to rising output from non-OPEC+ nations like the U.S. and Brazil.

Furthermore, a recent U.S. Supreme Court ruling has invalidated the global retaliatory tariffs imposed by the Trump administration under the IEEPA (International Emergency Economic Powers Act). While companies are now eyeing potential tax refunds, the complexity of the process makes a full recovery unlikely. Meanwhile, markets are bracing for "Plan B" the high probability that President Trump will utilize alternative trade laws to re-implement tariffs.

Impact on Refineries and Consumers

U.S. refineries, particularly in the Midwest, are heavily reliant on heavy crude from Canada. The nullification of the 25% tariff is expected to immediately lower import costs, providing a significant boost to refinery margins. This could eventually translate into lower retail gasoline prices for U.S. consumers, offering much-needed relief from inflationary pressures.

• Eliminating tariffs on Canadian crude wouldn't just help with pricing, but also improve U.S. energy security, as Midwest refineries are designed specifically to process heavy crude from Canada. Easier flow of this supply would significantly reduce domestic gasoline price volatility.

• With oil prices soaring, OPEC+ faces a difficult decision. Increasing production too quickly to control prices could lead to a loss of market share to the U.S., but maintaining production levels for too long could accelerate the global shift to clean energy.

• By 2026, energy demand will extend beyond transportation to support massive AI data centers. While these centers primarily rely on electricity, many will still depend on gas and oil reserves, new factors supporting global oil demand (baseload demand).

• Analysts suggest that Trump's "Plan B" might involve using Section 232 (national security) or Section 301 to impose country-specific tariffs instead of the IEEPA, which would create localized price volatility depending on the source of crude oil.

 

 

Oil Prices Under Pressure as IEA Slashes 2026 Demand Forecast Amid Global Oversupply Worries