Oil prices experienced a notable surge during Wednesday’s trading session, reaching their highest levels in months. This spike was driven by reports that U.S. President Donald Trump is considering targeted military strikes on Iranian military positions as part of his ongoing push for regime change in the country. As a result, Brent crude for March delivery rose by 3.63%, trading at $70.92 per barrel, marking the first time it has exceeded the critical $70 per barrel threshold since July 2025. Meanwhile, the West Texas Intermediate (WTI) contract saw an increase of 3.72%, reaching $65.49.
The unrest in Iran has led to a devastating humanitarian crisis, with U.S.-based rights group HRANA reporting a death toll of 5,937, while Iranian authorities have reported a lower figure of 3,117. Protests erupted on December 28, 2025, primarily in Tehran’s bazaars, spurred by the rapid devaluation of the Iranian rial against the U.S. dollar and escalating inflation, which has drastically increased the prices of basic goods. The Iranian rial recently plummeted to record low levels of approximately 1.4 to 1.5 million rials per U.S. dollar, a significant decline from about 25,000 rials per dollar a decade ago.
Commodity analysts at Standard Chartered have noted a shift in market sentiment, indicating that the previously dominant bearish narrative of oversupply has weakened. Traders are now focusing on more optimistic projections for the second half of 2026. The International Energy Agency (IEA) has revised its demand growth forecasts upwards for 2026, driven by a recovery in demand for petrochemical feedstock, despite a slowdown in gasoline consumption. Nonetheless, the IEA anticipates a more cautious growth of approximately 930 thousand barrels per day (kb/d) for 2026, with an overall outlook described as “modest” or “subdued” in light of rising transportation electrification.
Amidst these developments, low oil prices have begun to impact U.S. shale output growth. Reports indicated that Continental Resources, a pioneer in U.S. shale drilling, has halted operations in North Dakota’s Bakken shale for the first time in decades. Billionaire founder Harold Hamm criticized the current pricing dynamics, stating, “There’s no need to drill it when margins are basically gone.” The Bakken is typically viewed as a bellwether for the U.S. shale sector, with a breakeven price currently set at $58 per barrel.
Despite the challenges in the shale sector, analysts at Standard Chartered remain cautiously optimistic, forecasting that oil prices will average in the low to mid $60s per barrel throughout 2026.
In parallel, U.S. natural gas markets experienced an extraordinary rally over the past week due to a severe Arctic storm, which created a supply-demand imbalance. Gas futures surged, driven by short-covering and market anxiety related to the winter storm impacting much of the central and eastern United States. The extreme cold led to an increase in heating demand, while supply was disrupted by freeze-offs, compressor failures, and infrastructure strain. These supply constraints pressured power generation, prompting the use of oil for emergency electricity generation in parts of the northeastern U.S.
The front-month Henry Hub natural gas futures for February delivery soared to $7.439 per million British thermal units (mmBtu) during intraday trading on January 26, the highest level since November 2022, before settling at $6.80/mmBtu, marking the highest settlement since April 2023.
Looking ahead, the IEA projects that global liquefied natural gas (LNG) supplies are set to rise by 40 billion cubic meters (bcm) in 2026, representing a year-over-year increase of over 7% and the fastest growth rate since 2019. North America is anticipated to be the primary contributor to this growth. The U.S. LNG export capacity is currently undergoing substantial expansion, with more than 13 billion cubic feet per day (Bcfd) of new capacity under construction, expected to become operational by 2029. Key projects in this expansion include Plaquemines LNG, Corpus Christi Stage 3, and Golden Pass LNG, with liquefaction capacity projected to grow from approximately 17 Bcfd at the end of 2025 to over 19 Bcfd in 2026. In the previous year, the United States led the global LNG investment surge, accounting for over 80 bcm of approved annual capacity.
