Why could oil prices face risks later in 2026?

Oil markets are finding near-term support from geopolitical tensions, but the balance could shift later this year if diplomatic breakthroughs materialize. While supply risks linked to sanctions and regional conflicts are keeping prices elevated for now, a calmer global backdrop could eventually push crude prices lower.


Geopolitics Keeps a Floor Under Oil

Crude prices have remained resilient as political tensions involving major energy producers continue to shape market expectations. Efforts by the United States under Donald Trump to push for diplomatic resolutions with Russia and Iran have added a layer of uncertainty, but markets are treating these developments as longer-term possibilities rather than immediate game-changers. Until clarity emerges, geopolitical risk is helping to underpin prices.


Recent Price Action Reflects Supply Pressure


Over the past month, Brent crude has climbed from the low $60s to around the $70-per-barrel mark. This move has been driven by tighter enforcement of sanctions on Russian and Iranian oil, alongside ongoing supply disruptions. Together, these factors have limited available barrels and supported a firmer pricing environment.


Peace Deals Could Tip Prices Lower


Looking further ahead, markets are increasingly focused on the possibility of diplomatic progress. Any easing of tensions between Russia and Ukraine, or a broader de-escalation involving Iran, could eventually bring more oil back into global markets. Such outcomes would likely ease supply constraints and put downward pressure on crude prices, particularly in the second half of the year.


OPEC+ Watches Closely


If prices remain elevated in the coming months, the producer group known as OPEC+ may step in to stabilize the market. With spare capacity available, the group could choose to increase output if price strength persists, especially as summer demand approaches. Signals already suggest that a gradual return of production increases is being considered.


China’s Role in the Background

Another steady influence on the market has been China’s continued purchases of discounted Russian and Iranian oil. These flows, used both for consumption and stockpiling, have helped absorb sanctioned supply and are expected to continue as long as current restrictions remain in place.


The Big Picture

For now, oil prices are being pulled in two directions. Geopolitical tensions and sanctions are providing short-term support, while the prospect of peace and additional supply looms as a longer-term risk to prices. The coming months are likely to determine which force ultimately prevails, making oil markets especially sensitive to political signals as much as to fundamentals.