Oil's geopolitical premium is gone

Global oil markets faced multiple black swan events in 2025 — including the Israel-Iran war and Ukrainian strikes on Russian refiners — yet they were barely fazed.

- Ron Bousso

This calm may be the new normal in an era of energy abundance, even as the world becomes a more dangerous place.By any measure, 2025 was a chaotic geopolitical year, dominated by President Donald Trump's return to the White House in January and his blitz of policy, trade and diplomatic initiatives. A most pivotal moment for energy markets came on June 12 when Israel bombed military, government and nuclear sites across Iran. The US joined on June 22 with "Operation Midnight Hammer", targeting Iran's fortified nuclear facilities.

A US strike on Iran had long been among the top "doomsday scenarios" for oil traders. If attacked, the Islamic Republic was expected to retaliate by attempting to block the Strait of Hormuz, through which nearly a fifth of the world's oil and gas supplies are shipped.

The mere threat of such a cataclysmic event would cause oil prices to blow out into triple-digit territory, or so the theory went. While the start of the 12-day Israel-Iran war did see the crude oil volatility index spike to its highest point since early 2022, when Russian tanks first rolled into Ukraine, the oil price responded with remarkable composure this time around.