Oil at a crossroads: Are we facing a price explosion or a deceptive calm?

Today’s oil markets appear stable on the surface, but they are actually precariously balanced. Prices are moving within a relatively high range, supported by a combination of geopolitical tensions and production constraints, but this stability is not a result of market abundance or complacency. Rather, it stems from a delicate equilibrium between supply concerns and sluggish demand. The market is not in a state of certainty, but rather one of “waiting”—waiting for a major event that could change everything in an instant.

This type of market typically doesn’t remain stable for long. Simply put, when prices are driven more by expectations than reality, any unexpected news can trigger a sharp price reversal.

If there’s one factor that can move oil prices by tens of dollars in a matter of days, it’s geopolitics, specifically tensions related to Iran and vital energy chokepoints like the Strait of Hormuz. The market is currently pricing in the possibility of escalation, but not in the scenario of an actual supply disruption.

The difference between the two is enormous. A mere threat to supply raises prices gradually, while an actual disruption creates a sharp supply shock that could drive prices to unforeseen levels. Herein lies the danger: the market acts as if things will remain under control, while history shows that any miscalculation by political actors can lead to a rapid and unpredictable escalation.

In other words, the market treats risks as if they were “manageable,” while reality may prove otherwise.

In the absence of geopolitical stability, OPEC+ plays the role of market balancer. The alliance does not directly manage prices, but it manages supply in a way that ensures prices remain within a comfortable range.

Reducing current production is not merely an economic decision, but a strategic one aimed at:

But this balance isn’t always permanent. If prices rise sharply, internal pressures begin to push some countries to increase production, which can shift the balance back downwards. And if prices fall, the alliance intervenes with further cuts. This means the market is currently “partially regulated,” not entirely free.

Global demand: The silent force that sets the trend
Despite all the focus on supply, demand remains the most sustainable factor in determining long-term trends. Here, the picture is mixed. The US economy remains resilient, but it faces inflationary pressures that could delay interest rate cuts, implying a relative slowdown in activity. Meanwhile, China—the biggest driver of global demand growth—has yet to fully recover its momentum and is experiencing a slowdown in its real estate and consumer sectors.

This creates a strange situation:
Demand is not weak enough to drive prices down, but it is also not strong enough to trigger an upward surge. This creates what might be termed an “invisible ceiling” on prices, resulting from relatively weak demand.

Why doesn’t oil rise as strongly as gold and stocks?
While we are witnessing a simultaneous rise in stocks and gold, oil’s performance appears more subdued. This is no coincidence. Gold rises due to risk aversion, stocks rise due to liquidity and growth expectations, while oil is directly linked to the real economy. Consequently, any doubts about economic growth weaken its upward momentum.

In other words:
Oil doesn’t move based solely on expectations; it needs actual demand. This makes it more complex than other assets at present. Potential scenarios for oil prices in the coming months: If we try to translate all these factors into realistic scenarios, we find that the market faces three main paths:

Scenario 1: Geopolitical escalation (strong upward scenario)
In the event of any genuine supply disruption, whether through the Strait of Hormuz or a direct military escalation, we could see a rapid price surge to the $110–$130 range. This scenario is not driven by demand but by a supply shock, making it the most dangerous and immediate risk.

Scenario 2: Current stability (the most likely scenario)
If tensions persist without a real escalation, and with current OPEC+ policies remaining in place, oil is likely to trade sideways between $85 and $100. This scenario reflects the current “wait-and-see” market.

Third scenario: Global economic slowdown (downward scenario)
If global growth deteriorates or the US economy enters a clear slowdown, we may see prices fall to levels of $70-80, especially if this coincides with an increase in supply or a relaxation of production restrictions.