Oil prices opened higher this year after a general decline in 2025. As of January 2, Brent crude had climbed 0.30% to $61.03 per barrel; the US West Texas Intermediate (WTI) had gained by the same margin to $57.59 per barrel. Oilprice.com’s Charles Kennedy attributed the price gains to rising tensions between Russia and Ukraine.
And by January 14, oil prices had climbed to this year’s zenith. For instance, crude oil WTI had reached $61.97 per barrel, nearly 8% higher than 12 days ago. At the center of this fresh oil price surge are two key factors, three if you include the Russia-Ukraine conflict, and all of them relate to geopolitics: the Iran protests and Trump’s abduction of Venezuela’s president.
Geopolitics as a Temporary Catalyst
Iran sits at one of the world’s most critical chokepoints with regard to the movement of oil. As of January 2026, nearly 20% of crude oil going to international markets passes through the Strait of Hormuz. And even mere rumors of disruption spike prices.
In early 2025, US President Trump reinstated his hardline sanctions campaign, drawing Iran into an economic tailspin. By late 2025, Iranians were in the thick of inflation and shortages, which sparked protests. The situation escalated in early January 2026, and although it has subsided as of writing, the impact on oil prices is yet to wane.
According to a Barclays note to investors on January 13, the unrest in Iran “added about $3-4/barrel in geopolitical risk premium in oil prices.” Then there is the Venezuela wildcard. Trump has openly stated that kidnapping Venezuelan President Nicolas Maduro was necessary to “liberate” the country’s oil reserves. In fact, Trump summoned oil bosses to the White House after the operation and asked them realize his vision. “Do it for our country,” Trump told the oil executives, according to Bloomberg.
Trump’s adventure in Venezuela did move the dial with regard to oil prices. Immediately after the news of Maduro’s kidnapping emerged, crude prices rose more than 1%, according to a CNBC report. But sentiment flipped and Brent crude fell below $60 per barrel after Trump reassured the market that the interim authorities in Venezuela would supply 30 to 50 million barrels of crude to the US at market price.
Oversupply Is a Structural Headwind
The behavior of crude prices, such as WTI, over the past year makes for an interesting observation. There have been moments of a sharp decline, then tumultuous recoveries, and then another sharp decline. For instance, WTI’s price collapsed from $71.14 to $59.55 between April 2 and April 8, 2025. It later recovered to $73.33 on June 20, only to tank to $64.17 four days later. But the general trend has been downwards.
Source: Trading Economics
The International Energy Agency (IEA) has an idea why crude prices are behaving this way. According to its Oil Market Report for January 2026, although global oil demand is recovering, supply remains overwhelming. IEA forecasts global oil demand to reach 103.6 million barrels per day (mb/d) in 2026, against a supply of 108.7 mb/d. And because this oversupply has been in effect for quite a while now, geopolitical shocks and events such as Trump’s tariff shock in April last year are not enough to shift oil prices in a sustained upward trend.
According to the US Energy Information Administration (EIA), the monthly averages of Brent crude spot price fell consistently throughout 2025. The reason? Supplies in the global crude oil market exceeded demand. In fact, the EIA’s analysis shows that oversupply has been a feature of the global oil market since early 2022, and the production versus consumption gap is currently at its widest.
Source: EIA
Market Implications
Data may be all gloom but the market is having none of it. An Oilprice.com analysis shows that energy stocks started the year strongly after posting blowout returns in 2025. The analysis noted that the energy sector was up 7.5% as of January 15; the S&P 500 Energy index was up 9.14% year-to-date as at writing, as of January 22.
And since the surge early this year, oil futures have settled higher in choppy trading. WTI edged toward $61 per barrel on January 22, supported by rising winter heating fuel demand and the aforementioned supply concerns.
However, economist Julio Torres at Creative Planning warned that sustained higher oil prices could reignite inflation, and potentially trigger simultaneous sell-offs in stocks and bonds. This scenario may also limit the Federal Reserve’s ability to ease monetary policy further.
