Brent oil prices rose by over 16% in January, their biggest monthly gain since January 2022, when Russian forces were preparing to invade Ukraine, as a series of major supply disruptions in Venezuela, Kazakhstan and the United States collided with escalating geopolitical risk in the Middle East.
These setbacks delivered a substantial hit to global supply in January, and some outages are likely to linger for weeks or even months.
While the combined impact has helped to lift prices, the gains have been capped by rising output in other parts of the global market, including from key OPEC producers. That surge in supply has put downward pressure on prices in recent months.
Indeed, the International Energy Agency forecasts a massive 3.7 million bpd oversupply in 2026. Growing onshore and offshore inventories lend credence to this projection.
As discussed, President Trump’s increasingly explicit threats to strike Iran have added upward pressure to oil prices last week, which quickly reversed on Monday.
What we know is that oil prices will likely face further volatility in the coming days and weeks as events around Iran unfold.
What is known, however, is that the stakes for oil markets are very high.
Iran, OPEC’s fourth‑largest producer, pumped 3.3 million bpd in 2025, roughly 3% of global crude. Tehran has vowed to retaliate against any U.S. strike, including by hitting neighbouring states, raising the prospect of broader disruptions across a region whose energy exports supply nearly 20% of global consumption.
Markets are without a doubt on edge. The CBOE crude oil volatility index, which measures the market's expectations of volatility based on a range of put and call options, rose sharply from 30 at the start of the year to over 55 on Friday, its highest since the Israel-Iran war last June, when it reached 77.
Taken together, the recent physical outages and rising Middle East tensions create a strongly bullish backdrop for crude. So why hasn’t it been enough for Brent to break out of its $60 to $80 per barrel band that it's been trapped in for nearly two years?
