Oil Holds Near Lowest This Year as Trump Weighs on Sentiment

Oil prices have been on a rollercoaster ride in recent months, with geopolitical tensions and market sentiment playing significant roles in their volatility. As of early January 2025, oil prices have been hovering near their lowest levels of the year, with Brent crude futures trading at around $81 per barrel. The Trump administration's actions and policies have been a key factor influencing market sentiment and, consequently, oil prices.

The Trump administration's sanctions on Iran and Russia have had a significant impact on global oil supply and prices. In January 2025, the U.S. government issued new sanctions targeting Russia's oil sector, which could reduce Russia's oil exports to the global market (IEA Oil Market Report, 2025). These sanctions, along with those on Iran, have created supply disruptions and contributed to price increases. For instance, Brent crude futures hit a four-month high of $81/bbl in mid-January 2025, up $8/bbl from a month ago (IEA Oil Market Report, 2025).

The oil price war between Russia and Saudi Arabia in 2020 also had a substantial impact on global oil prices and market sentiment. The Trump administration's response to this event, including its decision to purchase strategic petroleum reserves, helped to stabilize the market and mitigate the impact of the price war (Irina Slav for Oilprice.com, 2025).

The Trump administration's focus on U.S. energy independence has led to increased domestic oil production, which has had a long-term impact on global oil prices and market sentiment. The U.S. has become a net exporter of crude oil and petroleum products, which has contributed to a more balanced global oil market and reduced the influence of OPEC+ on prices (U.S. Energy Information Administration, Short-Term Energy Outlook, January 2025).

Market participants, such as investors and traders, incorporate geopolitical risks into their decision-making processes by considering various factors that can disrupt the market equilibrium and affect oil price volatility. These factors include geopolitical tensions and conflicts, natural disasters and extreme weather events, political instability and regime changes, sanctions and trade restrictions, and market sentiment and investor behavior. To mitigate the impact of geopolitical risks on oil price volatility, market participants may employ risk management strategies, monitor and analyze geopolitical developments, conduct scenario analysis, and collaborate with other market participants.

In conclusion, the geopolitical landscape, particularly the actions of the Trump administration, has significantly influenced global oil prices and market sentiment in the long term. The U.S. sanctions on Iran and Russia, the oil price war between Russia and Saudi Arabia, and the focus on U.S. energy independence have all contributed to these long-term impacts. Market participants incorporate geopolitical risks into their decision-making processes by considering various factors that can disrupt the market equilibrium and affect oil price volatility. To mitigate the impact of geopolitical risks, market participants may employ risk management strategies, monitor and analyze geopolitical developments, conduct scenario analysis, and collaborate with other market participants.