LONDON/HOUSTON — The global oil market has entered a period of extreme turbulence as of February 23, 2026, with crude prices swinging violently between two opposing forces. On one side, a mounting geopolitical risk premium—driven by a potential military escalation between the U.S. and Iran—is threatening to choke off global supply. On the other, a growing wave of protectionist trade policies and "Section 122" global tariffs is stoking fears of a significant contraction in energy demand. This "tug-of-war" has left traders and policymakers alike searching for a stable floor in a market that seems increasingly unmoored from historical norms.

Currently, Brent Crude is trading in a volatile range between $70.50 and $71.50 per barrel, while West Texas Intermediate (WTI) hovers near $66.00. While these prices are lower than the triple-digit peaks seen during past energy crises, they include an estimated $6 to $10 "geopolitical risk premium." Without the immediate threat of conflict in the Middle East and the Strait of Hormuz, analysts suggest the market would likely be $10 cheaper, weighed down by a global supply surplus that some estimates place as high as 3.7 million barrels per day.

Escalation in the Gulf and the Geneva Gamble

The primary driver of the current price floor is the deteriorating relationship between Washington and Tehran. In early February 2026, tensions spiked following a series of naval drills in the Persian Gulf, leading many market analysts to price in a 70% probability of targeted strikes on Iranian energy infrastructure. The central anxiety for the market remains the Strait of Hormuz, a narrow waterway through which 20% of the world’s petroleum liquids pass daily. Any disruption there would transform the current surplus into a desperate shortage almost overnight. To avert this, diplomats are currently convened in Geneva for high-stakes nuclear and security talks, the outcome of which remains the single biggest "known unknown" for the month of March.

This geopolitical heat follows a chaotic start to the year for physical supply. In January and early February 2026, a series of "Arctic Express" weather systems battered North American shale basins and Central Asian production hubs. Kazakhstan reported significant outages, while production in the Permian Basin saw temporary dips due to infrastructure freezing. These localized disruptions tightened the immediate physical market, allowing OPEC+—the coalition of the Organization of the Petroleum Exporting Countries and its allies—to justify its February 1 decision to pause planned production increases. Led by Saudi Arabia and Russia, the group opted to maintain voluntary cuts of 2.2 million barrels per day through the end of the first quarter.

The timeline leading to this standoff began in late 2025, when a shift in U.S. trade policy signaled a move toward broader, more aggressive tariffs. While the U.S. Supreme Court recently struck down certain emergency tariffs, the administration’s pivot to "Section 122" tariffs—which could impose a 10% to 15% blanket levy on most imports—has sent shockwaves through the manufacturing and shipping sectors. This policy shift has fundamentally altered the demand side of the ledger, as the International Energy Agency (IEA) recently slashed its 2026 demand growth forecast to just 850,000 barrels per day.

Market participants are also closely watching the internal dynamics of OPEC+. At their most recent meeting on February 1, 2026, the group emphasized "full flexibility." This is a diplomatic way of saying that while they want to support prices, they are terrified of losing market share to non-OPEC producers if they keep prices too high during a global trade slowdown. The decision to keep Saudi production at 10.1 million barrels per day and Russian output at 9.57 million barrels per day was seen as a compromise to keep the alliance intact through a period of immense external pressure.

Winners and Losers in a Volatile Landscape

In this environment of high risk and fluctuating demand, the winners are largely those with "safe" domestic production and low debt. ExxonMobil Corp (NYSE: XOM) and Chevron Corp (NYSE: CVX) have positioned themselves as relative safe havens. Both companies have ramped up their Permian Basin operations, benefiting from the WTI price support provided by the geopolitical risk premium while being largely insulated from the physical disruptions occurring in the Middle East. Furthermore, as the U.S. moves toward a more protectionist trade stance, domestic producers with integrated refining capacities are seeing improved margins on refined products sold within North American markets.

Oilfield service giants like Halliburton Co (NYSE: HAL) are also seeing a resurgence in demand as North American producers attempt to squeeze more efficiency out of existing wells to capitalize on the current price volatility. Outside the energy sector, defense contractors such as Lockheed Martin Corp (NYSE: LMT) have seen their stock prices climb as the rhetoric surrounding the Persian Gulf intensifies, reflecting a market bet on increased military procurement and regional instability.

Conversely, the losers are found in sectors where fuel is a primary cost and trade is the primary engine of growth. Airlines are feeling the double squeeze of high fuel prices and a slowdown in international travel due to trade tensions. Delta Air Lines Inc (NYSE: DAL) and United Airlines Holdings Inc (NASDAQ: UAL) have both warned that higher-than-expected "crack spreads"—the difference between the price of crude oil and the petroleum products extracted from it—are eating into their 2026 profit projections.

The shipping and logistics industry is perhaps the hardest hit. A.P. Moller - Maersk A/S (CPH: MAERSK-B) is navigating a "perfect storm" of higher bunker fuel costs, the threat of a Hormuz closure, and the direct impact of Section 122 tariffs on global trade volumes. If the 10%–15% global tariff rate becomes a permanent fixture of 2026, the volume of crude and refined products being moved across oceans could drop significantly, leading to a glut of tanker capacity and a collapse in day rates for the shipping sector.

The Broader Shift Toward Energy Protectionism

The current volatility is not just a temporary market fluctuation; it represents a fundamental shift in the global energy order. We are witnessing the "de-globalization" of oil. For decades, the market operated on the principle of a globalized, efficient supply chain. Today, energy security is being prioritized over price efficiency. The U.S. pivot toward aggressive tariffs is an attempt to decouple its economy from global supply chains that are perceived as vulnerable or controlled by adversaries. This policy of "energy protectionism" is forcing other nations to respond with their own trade barriers, creating a fragmented market where oil may trade at vastly different prices depending on the jurisdiction.

This trend mirrors the trade wars of the late 2010s but with a far more potent energy component. In 2018-2019, trade tensions primarily affected consumer goods; in 2026, the "weaponization" of tariffs is directly colliding with the transition toward a greener economy. High oil prices—sustained by geopolitical fear rather than actual scarcity—are acting as a "shadow tax" on the global economy, potentially accelerating the transition to electric vehicles in some regions while delaying it in others where the cost of manufacturing remains tied to fossil fuel inputs.

Regulatory bodies are also stepping in. The IEA’s downward revision of demand growth is a stark admission that the era of relentless oil consumption growth may be ending sooner than expected, not because of a lack of oil, but because the world can no longer afford the political and trade-related costs of moving it. The policy implications are profound: if trade wars persist, the traditional role of OPEC+ as the market’s "swing producer" becomes less effective, as regional trade blocs seek to establish their own self-sufficient energy ecosystems.

Looking Ahead: The Q2 Pivot

As we move toward the second quarter of 2026, the market faces several critical "pivot points." The most immediate is the outcome of the Geneva talks. If a diplomatic breakthrough is achieved with Iran, the $10 geopolitical risk premium could evaporate in a matter of days, sending Brent crashing toward the $60 mark. This would put immense pressure on OPEC+ to extend its production cuts or risk a full-scale price collapse in the face of the 2026 supply surplus.

Strategic pivots are already underway. Many global majors are re-evaluating their capital expenditure for the second half of the year. If tariffs continue to suppress demand, we may see a significant pullback in new offshore exploration, with companies focusing instead on short-cycle shale assets that can be turned on and off more easily. The "market opportunity" in 2026 may not be in finding more oil, but in providing the technological solutions to make existing energy consumption more efficient amidst a high-tariff environment.

Potential scenarios range from a "de-escalation rally" in the broader stock market—if trade tensions ease—to a "stagflationary shock" if a conflict in the Gulf coincides with a full-scale global trade war. Investors are increasingly looking at "energy-adjacent" sectors, such as battery storage and domestic natural gas, as hedges against a crude market that has become too politically volatile to predict with traditional models.

A Market at a Crossroads

In summary, the global oil market in February 2026 is a study in contradiction. It is a market where physical abundance is being masked by geopolitical fear, and where the economic impulse to trade is being stifled by the political impulse to protect. The "tug-of-war" between supply shocks and demand destruction is currently in a state of uneasy equilibrium, but this balance is fragile. The coming months will determine whether the current volatility is a temporary fever or the beginning of a new, more fragmented era for global commodities.

For investors, the key takeaways are clear: the "geopolitical premium" is currently the primary support for prices, and its removal would expose a deeply bearish fundamental landscape. Monitoring the progress of the Geneva talks and the specific implementation of Section 122 tariffs will be more important than tracking rig counts or inventory data in the near term. The market is moving from a story of "barrels and demand" to a story of "borders and diplomacy."

Moving forward, the resilience of the U.S. consumer and the stability of Chinese industrial demand in the face of tariffs will be the ultimate arbiters of oil's value. As we look toward the mid-year mark, the market will likely remain "off balance," rewarding those who can navigate the complexities of trade policy as much as those who understand the mechanics of oil production.

This content is intended for informational purposes only and is not financial advice.