Geopolitical Risk Premium Boosts Oil Prices
Author: Samir Al Khoury
Date: February 20, 2026
Overview
Crude oil prices have surged to $72.21 per barrel, the highest since July 31, 2025. This marks a significant increase of approximately 20% from a low of $59.80 on January 7, 2026, and a 19% rise since the beginning of the year, following a challenging previous year where prices fell nearly 19%.
Market Volatility
The Oil Volatility Index (OVX), which measures market fear, has risen to 57.20 points, indicating a 10% increase and reflecting heightened volatility due to escalating geopolitical tensions, particularly between the United States and Iran. The market is bracing for potential U.S. military action against Iran, which has further fueled concerns over the stability of oil supplies.
Geopolitical Factors
The primary catalyst for the recent price increase is the intensifying geopolitical conflict between the U.S. and Iran, with fears of a possible U.S. strike and the potential closure of the Strait of Hormuz—a critical passage for global oil transport, accounting for about 20% of global oil demand and over 25% of seaborne oil trade. These geopolitical risks have added a significant premium to oil prices.
Supply and Inventory Dynamics
Recent data shows a substantial decline in U.S. crude oil inventories, which fell by 9.014 million barrels last week, far exceeding market expectations of a 1.700 million barrel draw. This sharp decrease contrasts with the previous week’s increase of 8.530 million barrels, indicating a tightening supply situation.
However, the overall supply remains robust, particularly from non-OPEC+ producers such as the United States, Canada, Brazil, and Guyana, which continues to exert downward pressure on prices.
Technical Analysis
From a technical standpoint, a bullish crossover, known as a “golden cross,” has occurred between the 20-day and 200-day moving averages, suggesting a potential continuation of the upward trend in oil prices. The Relative Strength Index (RSI) is currently around 65, indicating strong bullish momentum. Additionally, the positive directional movement index (DMI+) is at approximately 28, compared to 12 for the negative directional index (DMI-), highlighting strong buying pressure. The Average Directional Index (ADX) is nearly 36, confirming the strength of the upward trend.