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Oil prices climbed on Friday, lifted by geopolitical shocks that overshadowed otherwise bearish supply signals. Traders who had braced for a quiet session were jolted by fresh headlines from Europe, where hopes of a Russia–Ukraine ceasefire collapsed and French President Emmanuel Macron issued his sharpest warning yet against “appeasement.”
By late afternoon New York time, West Texas Intermediate (WTI) settled at $59.97 per barrel, up 0.44%, while Brent crude closed at $63.61, gaining 0.39%. The move reflected a day-long grind higher, with WTI trading between $59.42 and $60.50 and Brent ranging from $63.06 to $64.09. The rally was driven almost entirely by geopolitics: a weaker dollar provided a mild tailwind, but the decisive factor was the collapse of optimism around a peace framework.
Overnight, Vladimir Putin rejected key elements of the U.S. proposal, insisting on full control of Crimea and the four annexed regions. Macron, in a fiery morning speech, declared that Europe would not accept a settlement dictated by Moscow or “a betrayal orchestrated in Washington.” He went further, pledging that France was prepared to deploy troops as part of a post-war security force and would not rule out pre-emptive strikes if Russia continued massing forces. His remarks effectively killed lingering hopes of a quick ceasefire, forcing traders to reprice the Russia risk premium higher.
The implications were immediate. Market chatter turned to the possibility of tighter sanctions on Russian exports or renewed Ukrainian drone strikes on refineries and ports. European officials openly discussed a Phase-Out 2.0 of remaining Russian pipeline and seaborne volumes, reinforcing fears of supply disruption in 2026.
The Middle East added another layer of tension. While no new headlines broke Friday, European diplomacy around Ukraine included fresh language on “total containment” of Iran’s nuclear program and missile transfers to Russia. Tehran responded through back channels that any new sanctions would trigger Houthi attacks in the Red Sea, a threat markets took seriously after recent IRGC statements. The result: the Middle East risk premium, dormant for weeks, surged back to $3.50–4.00.
Remarkably, traders shrugged off otherwise bearish fundamentals. The EIA reported a 3.5 million barrel crude inventory build, the largest since March, but the data was ignored as futures curves flipped into steep backwardation. The M1–M12 spread widened to -$4.80, signaling acute near-term supply concerns. Refiners and airlines sold off, while upstream producers and oil service stocks surged.
Looking ahead, markets now assign less than 20% probability to a Ukraine ceasefire while betting roughly 65% on either European boots on the ground by summer or a major Iran–Houthi escalation in early 2026. With Brent already magnetized toward $65, traders warn that a break above could quickly open the path to $68–70, especially if weekend headlines bring more saber-rattling from Paris or Tehran.
For now, crude is caught in a geopolitical groove: oversupply signals remain in play, but the market is increasingly driven by the drumbeat of war, diplomacy, and the threat of new sanctions. December’s close suggests that geopolitics, not fundamentals, will set the tone for oil in 2026.
