Oil Prices Steady as Geopolitical Tensions Clash With Oversupply Fears

BY COMFORT OGBONNA

Oil prices were little changed on Tuesday, pausing after a strong rally in the previous session as investors weighed rising geopolitical tensions against lingering concerns about excess global supply. The market was still digesting gains of more than 2% from Monday, which were driven by heightened fears of potential supply disruptions following fresh accusations from Russia against Ukraine.

Brent crude futures for February delivery, which expire later on Tuesday, slipped 6 cents to $61.88 a barrel by 0755 GMT. The more actively traded March Brent contract eased 4 cents to $61.45 a barrel. U.S. West Texas Intermediate crude was also slightly lower, down 4 cents at $58.04 a barrel. Both Brent and WTI had closed more than 2% higher in the previous session as traders reacted to escalating political developments.

Market sentiment was shaken after Moscow accused Kyiv of attacking the residence of President Vladimir Putin, a claim that reignited concerns about the risk of further escalation in the conflict and the potential impact on Russian energy supplies.

Ukraine firmly rejected the accusation, describing it as unfounded and aimed at derailing ongoing peace discussions. The issue drew international attention after U.S. President Donald Trump said he was angered by details of the alleged attack following a phone call with Putin, adding another layer of uncertainty to diplomatic efforts.

Although Trump has repeatedly expressed optimism that a peace agreement could be within reach, the persistence of sharp rhetoric and accusations has left investors cautious. Analysts say the conflicting signals are making it difficult for markets to price in a clear outcome, keeping oil prices sensitive to headlines. According to Marex analyst Ed Meir, traders increasingly believe that reaching a comprehensive peace deal will be far more difficult than initially hoped, a view that is lending some support to prices despite the broader supply picture.

Additional supply worries emerged from the Middle East, where a Saudi Arabia-led coalition carried out strikes on what it described as foreign military support for UAE-backed southern separatists in Yemen. The coalition has reportedly asked UAE forces to leave the country, underscoring growing strains between the two Gulf powers. These tensions have added to concerns about stability in a region that plays a critical role in global oil production and exports.

Further unsettling the market, Trump warned that the United States could back another major strike on Iran if Tehran were to resume rebuilding its ballistic missile or nuclear weapons programs. Such comments have revived fears of renewed confrontation with Iran, potentially threatening oil flows through key shipping routes in the region.

Despite these geopolitical flashpoints, many analysts believe that a well-supplied global oil market will limit further price gains. Rising output from major producers and subdued demand growth in some economies continue to weigh on the medium-term outlook.

IG analysts noted that the push and pull between diplomatic efforts, oversupply concerns, and simmering geopolitical risks are likely to keep prices range-bound in the near term, with WTI expected to trade between $55 and $60 a barrel.

Looking further ahead, Marex’s Meir said oil prices are likely to trend lower in the first quarter of 2026, citing what he described as a growing oil glut. As a result, while geopolitical risks may continue to spark short-term volatility, structural supply pressures could ultimately cap rallies and push prices downward over time.