Global oil markets experienced significant volatility following recent geopolitical developments, with prices falling 3-4% after US President Donald Trump signaled a pause on potential military action against Iran. According to Peter McGuire, CEO of Australia-Trading.com, while immediate tensions have eased, the energy sector remains vulnerable to supply disruptions and geopolitical shocks.

Current Market Dynamics and Iran's Strategic Role

Brent crude prices retreated as immediate fears of a US strike on Iran subsided, but McGuire cautioned that the respite may be temporary. Iran's strategic position near the Strait of Hormuz presents ongoing risks to global energy supplies, with approximately one-third of worldwide crude shipments passing through this critical maritime route daily.

As the fourth-largest producer in OPEC, Iran accounts for roughly 4% of global oil output. McGuire emphasized that any escalation in the region could sharply disrupt supply chains and reintroduce a war premium into oil prices, noting that markets are currently operating in a "wait-and-see" mode.

Price Projections and Supply Considerations

Looking toward the first half of 2026, McGuire projected that crude could trade in the low-to-mid $50 range, provided Middle East tensions remain contained and no major geopolitical shocks emerge. Such price levels would benefit consumers and importing economies, though he stressed that geopolitical factors continue to represent the biggest uncertainty for energy markets.

Trump's remarks about potentially unlocking Venezuela's vast oil reserves could further impact an already well-supplied market. Venezuela holds the world's largest proven oil reserves, and any meaningful increase in output could exert additional downward pressure on prices, assuming steady demand conditions.

OPEC+ Outlook and Long-term Fundamentals

OPEC+ has indicated that global oil supply and demand are expected to remain broadly balanced in 2026, with demand growth continuing into 2027. McGuire believes the producer group's strategic decisions will largely depend on evolving geopolitical risks, including developments involving Iran, Venezuela, and ongoing conflicts such as the Russia-Ukraine situation.

Despite near-term volatility, McGuire highlighted that global oil consumption continues rising year-over-year, driven by electricity demand and petrochemical requirements. However, he emphasized that near-term price movements will be dictated more by geopolitical developments than by underlying market fundamentals, underscoring the complex interplay between political tensions and energy market dynamics.

Oil prices remained largely unchanged on Friday as market concerns over potential US military strikes against Iran began to recede, leading to a swift unwinding of geopolitical risk premiums that had driven crude to multi-month highs earlier in the week.

Current Price Movements

Both major oil benchmarks showed minimal price action during Friday trading:

These prices were recorded as of 0223 GMT, reflecting the market's cautious response to evolving geopolitical developments.

Geopolitical Tensions Ease

The oil market had experienced significant volatility throughout the week following protests in Iran and signals from US President Donald Trump regarding potential military action. Both Brent and WTI had surged to multi-month highs as traders priced in supply disruption risks.

However, late Thursday brought relief to the market when President Trump indicated that Tehran's crackdown on protesters was easing, effectively reducing concerns about imminent military intervention that could disrupt regional oil supplies. This development prompted what analysts described as a rapid unwinding of the "Iran premium" that had been built into oil prices.

US Inventory Data Weighs on Market

Adding downward pressure to oil prices, the US Energy Information Administration released weekly inventory data showing larger-than-expected builds in both crude oil and gasoline stocks. The substantial crude build exceeded analyst estimates, contributing to the market's bearish sentiment and compounding the effects of reduced geopolitical tensions.

IG analyst Tony Sycamore noted that this combination of factors led to the swift reversal from twelve-week highs, as both geopolitical and fundamental factors aligned to pressure prices lower.

Venezuela Production Developments

Further supply-side pressure emerged from Venezuela, where sources indicated the country had begun reversing its production cuts and resumed oil exports. This additional supply availability comes at a time when the market is already grappling with reduced risk premiums and rising US inventories.

Industry Outlook and Projections

Despite current market pressures, major industry players maintain optimistic long-term views. Shell released its 2026 Energy Security Scenarios on Thursday, presenting a bullish outlook for global energy demand and oil consumption growth. The company projects that primary energy demand could reach levels 25% higher than the previous year by 2050.

Meanwhile, OPEC provided its assessment on Wednesday, stating that oil supply and demand fundamentals will remain balanced through 2026, with demand growth in 2027 expected to mirror the pace observed in the current year.