The Oil Tug-of-War: Geopolitics vs. Global Glut

Author: Zain Vawda

Date: 10 February 2026

Summary

The article discusses the current state of oil prices, which are caught in a "tug-of-war" between short-term geopolitical risks, particularly tensions between the US and Iran, and a long-term global supply surplus. The author notes that while oil prices have remained steady near six-month highs, they are influenced by conflicting signals from geopolitical developments and market fundamentals.

Key Factors Influencing Oil Prices

The article identifies three primary factors driving the current market behavior:

• US-Iran Geopolitical Risk Premium: Ongoing tensions between Washington and Tehran are a significant concern. The US has issued maritime advisories for vessels in the Strait of Hormuz, a critical passage for global oil transport. Any military escalation could lead to a spike in oil prices.
• India-Russia Trade Dynamics: The potential reduction of Russian crude imports by India, a major buyer, could disrupt global supply chains and tighten the market, leading to higher prices.
• Long-term Supply Surplus: Despite short-term tensions, a substantial supply glut is expected in 2026, with forecasts indicating a surplus of nearly 4 million barrels per day. This oversupply is likely to cap any significant price increases driven by geopolitical events.

Market Outlook

The article presents two potential scenarios for the oil market:

• Bullish Scenario: If tensions escalate, particularly with Iran, oil prices could rise sharply, potentially breaking above $65 for WTI, with further gains possible.
• Bearish Scenario: Should diplomatic efforts yield positive results or if the focus shifts back to the oversupply situation, prices could decline, with technical support for WTI at $62.40 and a potential drop to $55.00.

Conclusion

Overall, while geopolitical factors are currently influencing oil prices, the long-term outlook remains bearish due to expected supply surpluses. Analysts suggest that the market is at a critical juncture, and the coming weeks will be pivotal in determining whether bulls or bears will prevail.

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