The global crude oil market is facing a new wave of pressure as escalating geopolitical risks lead to a sustained rise in oil prices. Analysts at Danske Bank have pointed out that the war risk premium has become deeply embedded in market pricing mechanisms, with expectations that oil price volatility may continue until 2025. This week, Brent crude prices broke through a key resistance level, reflecting deep concerns in the market over supply chain disruptions in several strategic production regions.
The current rise in oil prices is primarily driven by multiple overlapping geopolitical conflicts. Tensions in the Middle East have escalated again, threatening about 20% of global maritime oil transport; the conflict in Eastern Europe continues to disrupt traditional energy delivery routes to Europe; meanwhile, OPEC+ member countries are maintaining production discipline, with severely insufficient idle capacity to respond to sudden supply gaps. Unlike in the past, current market inventory levels are at a ten-year low, with data from the International Energy Agency showing that global oil inventories have fallen to their lowest levels in nearly a decade. This means that any slight supply disruption could trigger a more severe price reaction.
The market structure also confirms this trend: crude oil futures are exhibiting a significant backwardation pattern, indicating strong expectations among traders for short-term supply tightness. Historical data shows that similar geopolitical events have previously caused oil prices to rise an additional $5 to $15 per barrel, and today, due to weak reserves and tight inventories, the impact of equivalent events is amplified.
The vulnerability of key shipping channels further exacerbates the risks. The Strait of Hormuz, which sees 21 million barrels of oil pass through daily, is a lifeline for global energy; the Red Sea shipping route has recently faced frequent attacks, affecting the efficiency of the Suez Canal. Insurance costs for vessels in the relevant regions have surged over 300% year-on-year, and these costs are ultimately passed on to end consumers. Major oil companies have begun adjusting shipping routes, not only extending transport cycles but also increasing logistics expenses. European refiners are being forced to seek alternative sources for Russian oil, facing significant challenges in supply chain restructuring.
Danske Bank emphasizes in its analysis that future oil price trends will be dominated by three factors: the probability of the duration of conflicts, the limits of global idle capacity, and the resilience of demand. Currently, there are no signs of a quick easing of major conflicts, and capacity elasticity is nearly exhausted. Under the combined effects of low inventories, high risk premiums, and rigid demand, the market may remain in a state of high volatility for an extended period, making significant price declines unlikely.