Robert Palmer
Head of Energy Futures Clearing Sales, North America
Sasha Foss
Energy Markets Analyst
Oil markets rise as geopolitical risks intensify
Oil markets posted a stronger than expected performance through February 2026 in anticipation of conflict in the region between the US and Iran. This outweighed broad expectations of physical oversupply, which otherwise have brought prices lower. Brent front month futures climbed from $66 at the start of the month to $78 on March 2, driven by escalating geopolitical tensions and a widening conflict involving the United States and Iran. These rising tensions supported both Brent and the broader oil complex, lifting prices across the market.
Iran’s importance to global supply cannot be understated. When natural gas liquids and condensates are included, Iran’s oil-equivalent production stands at roughly 5 million b/d far surpassing Venezuela’s role in the market. The potential for regional escalation has raised concerns about disruptions to the Strait of Hormuz, a critical maritime corridor through which around 20% of global oil supply flows.
The risk to regional infrastructure has also grown. Saudi Arabia’s Ras Tanura refinery, with 550,000 b/d of capacity, was recently shut following aerial strikes; an example of how vulnerable key assets are in the current environment.
Beyond the Gulf, some shipping companies have begun pausing transits through the Bab al-Mandab Strait, which connects the Red Sea to the Gulf of Aden. The strait is strategically important for vessels accessing the Suez Canal. However, renewed Houthi aerial activity is raising security concerns and increasing voyage times for cargo rerouted around the Cape of Good Hope.
Meanwhile, Russia–Ukraine tensions remain entrenched. Talks have failed to advance meaningfully, and Ukrainian drone strikes on Russian oil infrastructure have intensified. Russia continues to face tightening sanctions that have pushed significant volumes of its crude into floating storage. A political standoff over the Druzhba pipeline has also emerged, with Hungary and Slovakia delaying the European Union’s 20th sanctions package. The package seeks to replace the price cap system with a more stringent ban on maritime services supporting Russian oil flows.
US Electric generating capacity on track for a record year
US developers and operators are expected to add 86 GW of new power-generating capacity in 2026, according to the EIA substantially surpassing the 53 GW added in 2025. Only 11 GW of utility-scale capacity is slated for retirement in 2026. However, recent trends suggest many retirements will slip: in 2025, just 4.6 GW of the 12.3 GW scheduled for retirement was taken offline, largely due to policy support and reliability concerns.
Deregulation measures support coal and manufacturing
The US administration has accelerated deregulatory initiatives aimed at bolstering domestic energy and industrial output. A new Executive Order directs the Department of Defense to prioritize long-term Power Purchase Agreements using domestic coal, reinforcing baseload grid reliability.
Separately, the administration has repealed the endangerment finding, a move expected to lower regulatory costs for automobile manufacturers. The EPA has also rolled back restrictions on mercury and other pollutants from power plants, a shift aimed at reducing compliance burdens for coal operators. Collectively, these measures signal a policy environment much more favorable to traditional energy sources and heavy industry.
In Illinois, the Governor JB Pritzker is looking to halt tax incentives for data centers which are pushing up bills for consumers. The governor is pushing for a two-year pause on tax credits for data centers and is urging PJM Interconnection to make larger customers pay their share. The question of affordability and who should pay for energy usage is becoming an increasingly political issue, particularly in a year with midterm elections. In New Jersey, a state of emergency was called by their new governor, Mikie Sherrill, due to increased utility rates.
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