Geopolitical factors are making a comeback to the oil market.

There are the critical developments evolving in Israel and Gaza, and now involving Hezbollah and suggestions that Iran might eventually be targeted not only economically but also militarily. New alliances are also forming in the region. We’ve seen Turkey’s engagement with Gulf countries and Egypt, and now with Iraq’s mediation, Turkey and Syria are planning a meeting to normalize relations. Russia and China are supportive of this, and Iran welcomes it. Meanwhile, in the Black Sea, there’s the ongoing war between Ukraine and Russia, including drone attacks, which continues with no resolution in sight, creating concerns about Russian intentions towards Eastern and Central European countries and Southeast Europe. Given all these factors, no one expects a smooth run for the oil markets. The recent price increase to $87 is closely tied to the renewed escalation in geopolitical tensions.

What impact could a weakened Biden have on these geopolitical fires?

This period of potential weakness for his administration provides an opportune moment for other global or regional powers to act. US intervention and influence may not be seen as credible. We could see countries like China, Russia, or Iran taking strategic steps. For instance, despite considerable pressure about Gaza, Israel has acted independently, highlighting the current administration’s lack of influence. Furthermore, Trump’s potential return to power in January 2025 further complicates the picture for energy markets. It’s likely he won’t adhere to the decarbonization goals set for 2050 and might dismantle the 2035 target for the power industry. His administration would probably set softer targets for the EPA and push for increased fossil fuel use, delaying the peak oil timeline.