The Brent curve remained intact. However, traders’ long-held belief that geopolitical unrest would only be a temporary occurrence also subtly changed. Early in January, a confidential memo started circulating among oil desks, but it wasn’t marked as urgent. However, it caused a change that is still having an impact on the energy markets.
The landscape had shifted from one of episodic flare-ups to something far more structural, as the memo’s framing made abundantly evident. It described a geopolitical situation—rooted in Venezuela, sharpened in Iran, and exacerbated by drone strikes near Russian-linked terminals in the Black Sea—rather than issuing a warning of temporary disruption.
| Key Factor | Detail |
|---|---|
| Trigger Memo | Circulated among energy traders in early January 2026 |
| Primary Risk Sources | Venezuela regime change, Iran unrest, Black Sea tanker attacks |
| Strategic Shift | Risk is now priced as permanent, not momentary |
| Supply Pressure | 4.6 million barrels/day from volatile regions like Iran and Venezuela |
| Market Behavior | Prices spiked 9% but stayed rangebound due to conflicting forces |
| Expert View | “Persistent geopolitical risk is now embedded in pricing models” |
| Reference | EnergyNow.com |
Shortly after President Trump’s shocking announcement that Nicolás Maduro was ousted from power in Caracas, Brent fell below $60. Analysts anticipated that a nation with the largest proven oil reserves would resume production and exports. What came next was more of a flood of uncertainty than a comeback. Refiners paused. The markets recoiled.
Then came Iran, where protests were raging and were heightened by American assistance to protesters. Prices increased by almost 9% in a single week as the crackdown worsened, pushing Brent over $66. Even that spike, though, felt hesitant. Traders felt as though they were acclimating to a new baseline rather than responding to headlines.
In the Black Sea, attacks on tankers operated by the West fueled the flames. Although no one accepted responsibility, it was obvious that the world’s oil infrastructure was now remarkably vulnerable, particularly in the vicinity of disputed export routes like Kazakhstan’s.
At one point, each of these incidents—the Black Sea, Iran, and Venezuela—might have been considered isolated. They are now represented on the map as an overlapping triangle of risk. Oxford Economics claims that this “geopolitical trifecta” has caused structural uncertainty to supplant transient volatility. Their January note clarified that risk premium is now a layer rather than a passing trend.
The memo’s approach, not its warning, was what made it especially novel. It suggested completely recalibrating models and incorporating conflict into standard deviation assumptions in place of price forecasting. To put it another way, risk isn’t decreasing. It’s turning into the scene.
A footnote in the memo mentioning Abqaiq—Saudi Arabia’s 2019 facility attack that momentarily shut down 5% of the world’s supply—made me stop. It was perceived as a black swan by traders at the time. It is beginning to resemble a blueprint these days.
This new pattern is supported by the data. Last year, the Black Sea region, Venezuela, and Iran combined to export 4.6 million barrels per day, or about 4.5% of the world’s total supply. Conventional reasoning can no longer be used to ignore or hedge away that volume, which is always in danger of being interrupted.
Crude prices, however, have stayed surprisingly stable. A growing glut explains this paradox—increasing conflict without uncontrollably high prices. According to tanker data, there are currently almost 1.3 billion barrels of oil afloat, the most since the 2020 pandemic slump. Land-based inventories are also growing.
However, the typical contango structure, in which future contracts are traded at a premium to prompt delivery, is not evident in the markets. Rather, we remain in backwardation, which means that even as supply increases, traders anticipate short-term tightness. This suggests something more profound: perhaps visibility, rather than excess or scarcity, is the true problem.
The so-called “shadow fleet” has expanded dramatically. Sanctioned barrels from Venezuela and Iran frequently pass hands covertly and occasionally mix in with legal cargo. A system already under strain is made more hazy by the lack of transparency, particularly from Chinese storage operations.
Commodities, including industrial metals, have been acting differently in recent days, according to consultants like Jeff Le. Gold has risen above $4,000. Nickel and copper have also experienced significant increases. Le contends that these movements show a renewed rush to tangible assets during periods of strategic insecurity and are not just driven by demand.
It is important to keep in mind that oil is particularly exposed. It travels across borders in tankers, depending on susceptible waterways, unlike gold. Approximately 20% of the world’s crude still passes through the Strait of Hormuz. Iran has the ability to disrupt supply routes at any time, even though it is unlikely to halt its own exports.
Oil markets have not completely panicked as a result of Tehran’s measured strategy in recent years, which has prioritized symbolic strikes over outright disruption. However, every action—even an unsuccessful one—increases the perceived vulnerability. It works incredibly well to keep traders on edge without completely initiating intervention.
This new dynamic is especially difficult for trading firms’ early-stage strategy teams. The predictive power of conventional supply-demand models has diminished. If misinterpreted, even small disruptions could cause excessive reactions in hedging or pricing structures.
Even though it doesn’t seem noteworthy, the memo’s final line, “Traders should assume instability as the status quo until proven otherwise,” has stuck with me. The posture is altered by the word “assume.” Once, the markets responded. They now look forward.
The rewiring then starts.
This change has the potential to strengthen market discipline, which is especially advantageous. In addition to pricing in longer-term contingencies, traders are reevaluating counterparty risk and improving algorithms that consider political risk in addition to refinery output. According to reports, insurance companies are also updating their threat assessments regarding tanker routes.
Thanks to improved surveillance capabilities and strategic alliances, refiners are now able to track cargo movements with remarkable accuracy. The objective is to create a system that can withstand shocks, not just prevent them.
In the end, the optimism here is found in the increasing sophistication with which risk is understood rather than in the calm of the market. Traders are preparing more intelligently and reacting more quickly by directly incorporating geopolitical data into their models.
That is not a sign of panic. That is advancement.
