Oil Price Outlook 2026 Part 2: Unleashing Geopolitical Hell

A few days ago, we took a look at what has been driving the fundamental side of the equation for oil prices. 

Today we’re diving into something a little more volatile for crude: Geopolitics.

For much of the past year, the conflict that has raged between Israel and Hamas served more of a red herring for crude prices. The fighting that has occurred since October 2023 put a serious risk premium on oil prices. 

That’s not too surprising given that any geopolitical clash in the Middle East sends the market into a frenzy over potential supply disruptions from the world’s largest OPEC producers. 

Of course, you and I both knew that kind of supply disruption would never materialize. Any significant threat to global supply would’ve sent developed nations headfirst into the fray. 

Just a few days ago, the UN Security Council approved the U.S. plan for a Gaza stabilization force and its ceasefire plan. 

But again, our eyes were never focused on this conflict as a driver for oil prices in 2026. 

For that, we need only look a few thousand miles to the north in Ukraine. 

Unleashing Geopolitical Hell in 2026

Like clockwork, crude prices will fall on any peace deals reached between Russia and Ukraine. 

The thinking goes like this…

Ending Putin’s ongoing war against Ukraine would send a flood of Russian crude onto the market. After all, Russian oil is being held back from U.S. and EU sanctions, G7 price caps, and the more recent pressure on Russian oil customers like India and China. 

That may not be entirely wrong considering the sharp increase we’re seeing in “oil on water” inventory. I’ve seen some estimates suggest that up to 48 million barrels of Russian crude is stranded on tankers at sea.

Both India and China have been taking full advantage of the situation for the past three years by buying Russian crude at a steep market discount. 

So any peace between Putin and Zelensky could certainly put short-term bearish pressure on global supply. 

However, there’s a few things we need to keep in mind. For starters, that sharp discount that countries like India and China have enjoyed would evaporate once price caps were lifted. 

We already know that global demand is not only healthy, it’s strong — both the IEA and OPEC see the world’s thirst for more oil climbing through 2050. If the fundamentals tighten in 2026, we’ll see crude prices rally. 

At some point you need to ask yourself whether the peace deal will ever come to fruition, too. The latest 28-point peace deal drafted by the Trump administration is a shot in the dark, with Zelensky having to make far too many concessions. 

The point is, this won’t be negotiated overnight.

And the longer we wait, the more this crude sell-off looks premature. 

Now let’s shift focus to another linchpin of oil-price volatility in 2026: U.S.–Venezuela tensions.

The renewed standoff between Venezuela and the United States carries with it the potential to destabilise global crude markets — not because Venezuela is a swing-producer on the scale of Saudi Arabia, but because its marginal capacity and alliances raise asymmetric risk that oil markets hate. 

Venezuela’s parliament just approved a 15-year extension of its oil-producing joint ventures with Russian companies — an energy alliance rooted until 2041. Alongside this news, the U.S. has publicly flagged potential military actions against Venezuelan facilities tied to both drug-trafficking and state-run energy production.

Keep in mind that even though Venezuela’s oil industry is rife with corruption and production has fallen off a cliff since Chavez took over, it is still a vital source of heavy crude for countries like China. 

If Washington keeps escalating the situation, or if Caracas responds by closing ports, shutting production, or pivoting supply chains toward the Russia-China axis, the impact will be felt among the incremental barrels that move the delta between surplus and deficit in 2026.

I know it feels safer to write that consensus for 2026 is notably bearish — analysts at Goldman Sachs project WTI prices to average $53 per barrel next year, but that forecast assumes ‘business as usual’. 

It fails to price a disruption in Venezuela of even a few hundred thousand barrels per day — which might sound trivial relative to global flows, but not trivial when markets are already finely balanced. 

We’re just one target on a Venezuelan port facility away from spiking prices. Maduro may be saber rattling like usual, but nobody can deny the psychological ripple that has occurred from President Trump’s aggression against cartels in South America. 

In 2026 the oil market won’t be shaped solely by tighter supply and demand fears. It’ll also come from the geopolitical tensions that have persisted over the years. 

That’s where price shocks start — quietly, then loudly, and always unexpectedly.