By Samer Hasn, Senior Market Analyst at XS.com
Oil prices increased modestly for the second consecutive day, with WTI and Brent crude attempting to stabilize above $58 and $61 per barrel, respectively.
The increase in oil prices comes amid multiple signals of escalating geopolitical tensions across several regions, which could pose risks of supply disruptions.
Reuters reports that a Ukrainian drone strike on the Yuzhnaya Ozereevka terminal in late November disrupted exports and led to an approximate 6 percent decline in Kazakhstan’s oil output, as the facility handles a substantial portion of Caspian crude.
Despite a recent meeting between U.S. and Ukrainian leaders indicating closer diplomatic engagement, allegations concerning attacks on Russian leadership property have introduced additional uncertainty regarding the potential for significant escalation.
This added a new layer to the current stance of escalation on multiple fronts in this war. The Russia-Ukraine conflict has increasingly transformed into a war targeting economic resources as a primary strategic objective. Attacks against Russian shadow fleets are escalating, along with repeated targeting of vital Russian oil facilities.
The persistence of this escalation could result in significant and unexpected supply shocks, which may not be anticipated by decision-makers in Russia, Ukraine, or the United States, the latter potentially benefiting from reduced Russian output.
In the Middle East, Iranian leadership declared a state of “all-out war” with the United States, Europe, and Israel, while Israel further intensified its rhetoric.
These factors reinforce concerns about broader instability in the Middle East, which typically sustains a risk premium on crude oil due to the potential for short-term supply disruptions.
However, the market’s near-term gains are limited by concerns regarding potential oversupply. Analysts note that global oil production increased in 2025 according to Reuters, and the International Energy Agency projects that supply will exceed demand by 3.85 million barrels per day in 2026, a dynamic likely to cap prices unless significant disruptions occur.