Oil markets may be underpricing supply and geopolitical risks

what happened

According to Newsmetry API, crude has largely driven market moves since the US and Israel declared war on Iran on February 28. Lower oil prices ease inflation concerns, while a rise in crude can revive expectations of tighter Federal Reserve policy and trigger an equity selloff. Oil and stocks have been moving in opposite directions.

Nigel Green, CEO of the deVere Group, says prices are reflecting peace that has not yet materialized. Crude fell after President Trump announced on social media that Russia and Ukraine had agreed to stop attacks on each other’s energy infrastructure. Green said the underlying situation had not changed, while a similar agreement announced in September “barely lasted a week.”

Hurricane season is also under way, with Isaias prompting producers to shut down about 63% of Gulf of Mexico oil output. Iran-backed Houthis continue attacks on Saudi Arabia, which has the world’s largest spare oil capacity. Goldman Sachs said adaptation to Middle East supply disruptions would eventually lower prices, but warned that rising tensions still create significant upside risks.

why it matters

The combination of geopolitical conflict, weather-related outages and uncertainty over ceasefires keeps the oil market highly sensitive to headlines. Green argues that these factors justify a risk premium ahead of winter, while Goldman Sachs highlights the possibility of further price upside if tensions escalate.

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