Why Oil Is Rising

Why oil is rising is becoming increasingly clear. Oil has moved back above $100, and this time it doesn’t feel like a short-term spike the market will quickly forget. It looks more like a moment when geopolitics is fully returning to prices—not as a side factor, but as the main force driving direction. Once Iran and the strategic artery of global energy supply, the Strait of Hormuz, enter the equation, it becomes increasingly difficult to find a scenario that would be genuinely bearish for oil prices.

For a long time, the market operated under the assumption that any tension was temporary and manageable. That mindset is now beginning to break down. Not because something dramatic changed overnight, but because a broader picture is forming in which none of the realistic outcomes appear stabilizing. And that’s the problem. Investors are not used to pricing an environment where even the “best-case scenario” only means a smaller problem, not a solution.

When we look at the options available to Donald Trump, it becomes clearer why oil is holding elevated levels. The idea that the United States could simply step back and let the region resolve the situation on its own does exist, but in practice it is almost unworkable.

Such a move would effectively hand control over a critical shipping route to Iran, immediately increasing the geopolitical risk embedded in oil prices. The market would not interpret this as de-escalation, but as the beginning of a new era of uncertainty, where supply is not guaranteed but conditional.

More often discussed is the scenario where nothing fundamentally changes and the situation remains “as it is.” But this may be the most underestimated scenario of all. In this context, the status quo does not mean stability—it means persistent tension.

Limited throughput in one of the world’s most important oil transit routes, rising transportation costs, and above all the psychological pressure on a market that is beginning to realize that the risk will not disappear tomorrow or next month. And markets have a well-known trait: they dislike uncertainty more than bad news. The result is not calm, but a slow, systematic drift higher in prices.

Then there is the scenario that is discussed more cautiously but has the greatest potential to surprise the market—escalation. Iran has already demonstrated its ability to target energy infrastructure in the region in ways that can sideline a significant portion of production in a very short time. At that point, the logic of the market fundamentally shifts.

It is no longer about how much oil is currently being produced, but how much could disappear from the market within days. And this shift—from reality to risk—is what drives sharp price spikes. The market stops focusing on balance and starts pricing in scenarios that were recently considered extreme.

At first glance, it might seem that the solution could be a new agreement, a return to diplomacy, and a gradual easing of tensions. But here too, reality diverges from expectations. Any new deal with Iran would likely involve concessions and partial sanctions relief, which could theoretically increase oil supply. The problem is that such an agreement would be neither as stable nor as robust as the JCPOA, and regional tensions would not disappear.

Moreover, other powers—particularly Israel—would immediately come into play and could disrupt the process again. The result would likely be short-term relief rather than a lasting solution.

All of this is beginning to show in market behavior itself. The move from around $85 back above $100 was neither slow nor cautious. It was fast and decisive, which usually signals a shift in how risk is being perceived. This is not just about technical levels or charts—it reflects a market that is beginning to reprice the probability of scenarios it previously ignored. And once that happens, the return to previous levels is often more difficult than most expect.

Interestingly, this development does not affect oil alone. It has a direct impact on precious metals as well, although not in the straightforward way often assumed. In the short term, geopolitical tension typically supports gold, as investors seek safe havens. Capital moves from riskier assets into those with a long-standing role as stores of value, and gold tends to respond quickly. Silver usually reacts more slowly, but in stronger moves it often catches up very dynamically.

However, higher oil prices also mean higher inflationary pressure, which creates the opposite effect. Central banks, including the Federal Reserve System, have less room to ease monetary policy. Higher interest rates and a stronger dollar then act against gold or at least limit its upside. The result is an environment where two powerful forces collide—fear and monetary reality. And that is exactly why gold often reacts impulsively but then runs into constraints.

From a longer-term perspective, however, the picture is beginning to shift. If higher energy prices become a structural issue and geopolitical tensions persist, an environment is forming in which gold gains a much stronger position—not as a short-term hedge, but as a strategic asset. The combination of higher inflation, rising debt, and increasing global instability creates conditions in which gold’s role naturally strengthens.

And this brings us to what the market is still underestimating. Investors continue to look for a scenario that would push oil significantly lower and return things to “normal.” But such a scenario currently does not appear realistic. De-escalation is fragile, the status quo is inflationary, and escalation is a price shock. That means current prices may not be the peak, but rather the beginning of a new phase.

This is no longer just a story about oil. It is a story about a world where geopolitics is returning to asset pricing—and this time, much more forcefully than markets have been used to in recent years.