The paradigm of a clear and unidirectional relationship between geopolitical factors and oil prices is breaking down. Gone are the days when geopolitics of the Middle East played an obvious role that simply raised the risk premium on oil prices.
In the near term, both Saudi and Iranian foreign policy is more likely to push oil prices lower than higher. In the medium and long term, there are as many geopolitical headwinds for global oil prices as there are tailwinds (listed in the tables below), which makes it difficult to give a clear forecast beyond expecting volatility.
Nonetheless, in the near term, the headwinds outweigh the tailwinds, especially when we combine geopolitics with the fundamental factors, as discussed in the next Insight, Oil Price Headwinds.
Headwinds to oil prices:
Tailwinds to oil prices:
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