How is Oil Affected by Current Events?
Oil isn’t just a resource, it’s the heartbeat of the global economy. It makes the world go round and keeps planes flying and cars driving, not to mention machine operations in factories.
Yet, oil is always priced, going up and down. It generates a constant movement in pricing based on major world events, from war to economic development to shifts in increasing renewable energy resources.
Oil prices fluctuate due to world events, even instantly, impacting any micro and macro markets, from gas stations and warehouses to grocery store registers.
Understanding such developments is crucial for everyone, from traders who manipulate the market to businesses looking to avoid escalating expenses, to investors wanting to capitalize on trends, or government officials trying to stabilize countries.
Main Factors Affecting Oil Prices
Supply and Demand
It's a matter of balance. When there's too much oil and not enough buyers, prices drop, when there are too many buyers and not enough supply, prices rise.
In 2020, the world came to a standstill, consumption was down, and oil prices dropped to an all-time low, with West Texas Intermediate hitting negative $37 per barrel.
In 2021, consumption was up as humans returned to work and travel, even more so than before, and oil was almost $80 a barrel. It's a seesaw determined by how much and how often people work or travel, it's oil as a microcosm of life.
Geopolitical Events
Oil hates uncertainty. When the Middle East is involved in military action or sanctions, supply is limited, and oil prices rise. This occurred with the Russian invasion of Ukraine, Brent crude oil rose 14% in one day in March 2022, as investors feared lost shipments after sanctions were placed one day later.
Even when shipments are not lost, the potential of uncertainty is enough to change prices. When global powers go to war, oil suffers, making it as much of a geopolitical weapon as a financial asset.
Economic Indicators
When the GDP increases, there are more flights in the air and more cars on the highways, with more factory equipment running, each piece of machinery using oil, meaning prices increase.
When a recession occurs, demand drops, and prices fall. In 2023, the China reopening created demand increases, and Brent crude reached $85 a barrel. But European sentiment surrounding a potential recession lowered it.
Employment numbers and inflation signal whether people think the economy is booming or in a downturn, and subsequently determine the future of crude oil investing.
Natural Disasters
Mother Nature gets in the way of what oil is trying to accomplish. Hurricanes in the Gulf of Mexico and natural disasters with wildfires nearby halt production in a jiffy. For instance, in 2021, Hurricane Ida shut down 94% of production in the Gulf.
A natural disaster occurred, and in the next few days, prices adjusted up by 5%. Such shocks are transient and harsh, but when compiled with so many other challenges to oil, it's clear that even nature bows to the omnipotence of oil, or at least, international supply and demand efforts for it.
Current Events and Their Impact on Oil
Conflicts
Brent crude prices rose in June 2025, when Israel attacked Iranian nuclear and military facilities. The collateral damage raised flags that the potential for a Middle East war extended from that moment and could involve even more countries in already tenuous settings. On June 12, Brent crude rose nearly 13% intraday, closing up nearly 7%. The key traders thought that if fighting heightened over time, physical operations would be lost, meaning supply would be jeopardized. The Middle Eastern conflict could jeopardize future supplies.
Economic Recovery Post-Pandemic
Since COVID, oil prices have risen and fallen as demand rose due to attempts to reopen economies, traveling, growing industrial capacity. Despite China's stimulus measures in 2023, the international demand increase was 1.5 million barrels per day, oil prices rose relatively to $80.
Yet, China is still in the hole concerning demand, it hasn't manufactured all it needs to for foreign and domestic entities, and its refineries not at peak capacity have left markets worried. Where economic recovery can be good for oil, it's bad.
Transition to Renewable Energy
The green wave is building momentum. In 2023, never before has so much solar and wind capacity been installed in one year, and the annual installation of EVs continues to rise. Tesla alone sold 1.8 million vehicles.
And with policies like the $369 billion climate package proposed by President Biden, this transition only happens more quickly. Oil isn't gone, it's just that demand growth is history, and peak demand seems to be the next step on the timeline, further changing oil's place in the energy mix.
Conclusion
Oil prices are a live feed of the world’s pulse. Oil prices fluctuate as wars erupt, nations recover, hurricanes form, and legislation passes.
Oil prices aren't an arbitrary number, it's a sign of something, of change. Whether within the investment community or the political arena, to executives, it's a way to avoid higher expenses before they occur.
To shareholders, it's a way to identify the next big thing. To public servants, it's a way to manage the fallout of increases or decreases. When so much is known within moments, recognizing what happens to oil prices will keep everyone ahead of the game.
