Oil Surges $10 as Geopolitical Tensions Shake Energy Markets
If you thought the energy sector was dead after the clean energy push, think again. Crude oil prices just logged their biggest monthly gain in over a year, jumping $10 per barrel in January alone. Brent crude now trades around $67/barrel—the highest since September 2025.
What’s driving it? A perfect storm of supply disruptions, geopolitical tensions, and renewed demand concerns.
The Numbers
Here’s the current state of play:
- Brent crude: ~$67/barrel (up from ~$57 in early January)
- WTI crude: ~$64/barrel
- January gain: +$10/barrel for Brent, biggest monthly rise since late 2024
- 2026 forecast: EIA expects $58/barrel average for Brent
The International Energy Agency (IEA) flagged the surge in their February report, pointing to weather-related supply disruptions and escalating tensions with Iran as primary drivers.
What’s Behind the Rally?
Several factors converged to push prices higher:
- Supply outages — Cold weather in the Gulf of Mexico and North Sea disrupted production
- Iran tensions — Escalating geopolitical tension between Iran and the U.S. added risk premium
- OPEC+ discipline — Production cuts from Saudi Arabia and allies remain in place
- Demand resilience — Global oil demand remains stronger than expected
However, the IEA also warned that oversupply risks loom later in 2026. They’re forecasting a “sizable surplus” as non-OPEC production (particularly from the U.S.) continues to grow.
What This Means for Your Portfolio
Energy stocks had a rough 2024-2025, but the tide may be turning:
- Energy sector ETFs — XLE and similar funds have outperformed the S&P 500 in recent weeks
- Oil majors — Exxon, Chevron, and Shell benefit from higher prices
- Canadian producers — Suncor, Cenovus, and Canadian Natural Resources all benefit from higher WTI
- Watch inflation — $10 oil could reignite inflation concerns, potentially impacting Fed rate cut timing
My Take
I’m cautiously optimistic about energy, but with caveats.
On the bullish side: Geopolitics are unpredictable, and the Iran situation could easily escalate further. OPEC+ has demonstrated they’re willing to defend prices. And let’s be honest—despite all the talk about clean energy, the world still runs on oil.
On the bearish side: The U.S. is producing more oil than ever (around 13 million barrels per day). Electric vehicle adoption is accelerating. And the IEA’s oversupply forecast for late 2026 isn’t bullish.
My take? Energy makes sense as a portfolio diversifier—maybe 5-10% of your holdings—but I wouldn’t go overweight. The long-term trend is toward renewables, even if oil remains relevant for decades.
If you’re investing in energy, focus on companies with strong balance sheets and low production costs. They’ll survive any downturn.
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