Can you spot what all of Trump's foreign interventions have in common, in terms of upward pressure on the price of something perhaps?
Looking ahead to the second half of 2026, the market faces two distinct scenarios. In the first, a diplomatic breakthrough in Geneva could remove the risk premium overnight, causing a sharp "flush out" of long positions and a rapid descent in prices. In the second, a military escalation could see prices briefly spike toward $100 before the sheer weight of the global surplus and the potential for a global economic slowdown bring prices back down to earth.
Strategic players are already positioning for these outcomes. European majors like Shell PLC (NYSE: SHEL) and BP PLC (NYSE: BP) are continuing to pivot their capital expenditures toward low-carbon energy and natural gas, hedging against a long-term decline in crude profitability. Meanwhile, U.S. independent producers are focusing on capital discipline, prioritizing "value over volume" to ensure they can remain profitable even if the $63 average proves to be the high-water mark for the year.
The current market pricing appears to be overweighting geopolitical risk at the expense of fundamental oversupply indicators. The significant inventory builds in 2025 and projected surplus for 2026, coupled with strategic export management by Saudi Arabia and Russia aimed at price support rather than volume expansion, suggest limited upward potential.
If geopolitical tensions de-escalate without a corresponding reduction in output or a significant demand shock, the 'geopolitical premium' could rapidly evaporate, exposing the market to downward price pressure. Furthermore, the energy sector's elevated P/E ratios may not be justified if the anticipated supply surplus materializes, leading to a valuation reset.
Historical interventions by Saudi Arabia to drain global oil gluts demonstrate a capacity for market manipulation that could reverse current price trends. The recent surge in USO ETF performance of 9.68% over the last month and Brent crude's 9.20% monthly rise may reflect speculative positioning vulnerable to a fundamental correction.
Earlier, the market anticipated a surplus of 2.3 to 3.1 million barrels per day (mb/d) for 2026. Usually, a surplus brings prices down. Even experts predicted that this glut would keep prices low or even make them cheaper.
But the current military situation has flipped that prediction on its head.