The oil market's geopolitical premium vanished in 2025, and it might never return. But is this a cause for celebration or concern?
London, December 22nd, 2025 - The year 2025 was a tumultuous one for global politics, marked by President Donald Trump's return to power and a series of unexpected events, including the Israel-Iran war and Ukrainian strikes on Russian refiners. Yet, the oil markets remained remarkably unfazed. This begs the question: has the world entered a new era of energy abundance, even as geopolitical tensions escalate?
The year's most pivotal moment for energy markets occurred on June 12th when Israel launched strikes on Iran's military, government, and nuclear sites. The U.S. joined the fray on June 22nd with Operation Midnight Hammer, targeting Iran's fortified nuclear facilities. Historically, a U.S. strike on Iran has been considered a doomsday scenario for oil traders, as it could lead to the Islamic Republic attempting to block the Strait of Hormuz, a crucial shipping lane for global oil and gas supplies.
But here's where it gets interesting: despite the Israel-Iran war and the potential for major supply disruptions, oil prices remained surprisingly stable. Brent crude futures rose briefly but then dropped back to pre-war levels by June 24th, when a ceasefire was brokered. This calm in the oil markets is in stark contrast to the past, where geopolitical tensions often sent prices soaring.
Oil Markets: Jaded or Justified?
In 2025, oil futures oscillated within a narrow range, with prices between $60 and $81 per barrel. This stability is a far cry from the previous year's volatility, when Russia's military buildup near Ukraine sent prices skyrocketing. The 2022 rally was fueled by fears of Western sanctions on Russian oil exports, but these concerns never fully materialized.
And this is the part most people miss: the oil market's muted response to recent geopolitical events may be due to a simple reason—there's just too much oil and gas in the world. The U.S. has led the charge in increasing production, becoming the world's largest producer and exporter of oil and liquefied natural gas (LNG). OPEC+ countries, including Russia and Kazakhstan, have also ramped up output, reversing years of production cuts.
The International Energy Agency predicts a massive oversupply of nearly 4 million barrels per day in 2026, which could continue into the following year. This abundance is due to strong prices, encouraging U.S. shale producers and others to maintain or even increase output, thanks to advancements in drilling technology. OPEC+ has also signaled plans to accelerate investment to expand production capacity.
Calm Before the Storm?
But is this calm in the oil markets a sign of stability or a precursor to future risks? Howard Marks, a renowned investor, once said, "Risk is highest when it's perceived to be lowest." OPEC could reverse its production increases if global supplies continue to rise, and ongoing tensions between Israel and Iran could add further pressure.
However, for energy markets to truly be affected, a physical change in oil volumes would be required. In today's world of abundant supplies, geopolitical fears alone may no longer move the needle. But is this new normal truly sustainable, or are we overlooking potential risks?
Ron Bousso, the Reuters Energy Columnist, provides expert commentary on global energy markets and their interplay with geopolitics, the economy, and everyday life. His insights cover a range of energy sources, from traditional oil and gas to renewable power. Prior to this role, Ron was the Oil and Gas Corporates Correspondent at Reuters, breaking major stories on top energy companies. Stay tuned for more of his insightful analysis.
