Oil markets are experiencing a sustained bullish trend as traders increasingly bet on rising prices amid mounting geopolitical tensions in the Middle East. The global Brent benchmark has exhibited a call skew—a premium for bullish call options—for 14 consecutive sessions, while U.S. crude has followed for 13 days, marking the longest streaks since late 2024. This optimism is largely driven by heightened risks surrounding Iran, where internal unrest and warnings from the U.S. have raised concerns about potential disruptions to global oil supply.
The unrest in Iran, including deadly protests against Supreme Leader Ayatollah Ali Khamenei, has drawn international attention and heightened market anxiety. U.S. President Donald Trump’s warnings and deployment of naval forces underscore the potential for conflict, though officials emphasize avoiding escalation. These developments echo past geopolitical events, such as the 2024 Israeli strikes on Iranian targets and the 2023 Hamas attacks on Israel, which temporarily spiked options premiums before easing when oil infrastructure remained intact. Traders and hedge funds are using options as hedges against uncertainty, with open interest in Brent call options growing at its fastest pace in six years and net-bullish positions reaching levels not seen since August. Analysts note that the market remains “nervous,” with a strong focus on Iran’s 3.3 million barrels per day of oil production.
Structural issues in the oil industry amplify these risks. Chronic underinvestment in exploration and production has led to declining global conventional oil discoveries, from over 20 billion barrels of oil equivalent annually in the early 2010s to just 5.5 billion boe per year from 2023 to September 2025. Exploration expenditures have also dropped significantly, meaning new production is concentrated in a few hotspots like Guyana and Brazil, dominated by major oil companies. Nearly 80% of global oil production and 90% of gas comes from fields past their peak, and without increased upstream investment, the industry could face an 8% annual drop in oil output and a 9% drop in gas, raising the potential for shortages and price spikes.
Short-term market dynamics may be tempered by U.S. shale production, which could cap prices early in 2026, but geopolitical escalations—especially involving Iran—could reverse this trend, leading to inventory drawdowns and higher prices later in the year. Brent prices are forecasted to average around $55 per barrel, though risks such as unrest in Iran or disruptions in Venezuela could trigger sharp rallies. Investors are focusing on companies with strong cash flows and efficiency that are well-positioned to benefit from higher prices or increased exploration activity.
Key U.S. companies that may offer opportunities amid this environment include ExxonMobil, with diversified operations and dominance in high-growth areas like Guyana; Chevron, benefiting from cash flows and high-growth regions such as Venezuela; and ConocoPhillips, focused on efficient shale production. Occidental Petroleum’s low breakeven costs, Halliburton’s increased drilling activity, Schlumberger’s technology-driven services, and Baker Hughes’ exploration support also position them for potential gains. These companies highlight resilience and growth potential, but investors must remain attentive to evolving geopolitical and structural supply risks as the energy landscape develops through 2026.
