WTI crude oil futures are holding near six-month highs around $66.5 per barrel as markets weigh diplomatic progress against persistent geopolitical and macroeconomic risk. While renewed US–Iran negotiations in Geneva offer hope for de-escalation, traders remain cautious about potential disruptions to Middle East supply routes. At the same time, President Donald Trump’s decision to raise global tariffs to 15% has reintroduced concerns over global growth and inflation, creating a complex backdrop for energy markets.

Geopolitical Premium Remains Embedded

Iranian officials have signaled that a diplomatic “win-win” outcome is achievable, and reports indicate that any potential US military action would likely be limited in scope. That has eased immediate fears of a full-scale regional conflict.

However, markets remain highly sensitive to developments surrounding the Strait of Hormuz, through which roughly one-fifth of global petroleum exports transit daily. Even limited military escalation could disrupt tanker traffic, raise freight insurance costs, and tighten physical crude supply.

This persistent geopolitical premium helps explain why oil has rallied 10.23% over the past month despite broader analyst expectations of oversupply later in 2026.

Tariffs Reshape the Demand Narrative

President Trump’s rapid escalation of global tariffs to 15%, following the Supreme Court’s rejection of prior “reciprocal tariffs,” introduces fresh demand-side uncertainty. Higher import costs risk slowing industrial production and trade volumes, both of which are closely linked to oil consumption.

Although crude rose 0.53% to $66.83 per barrel on February 23, 2026, prices remain 5.47% below levels seen a year ago. That divergence highlights the tension between short-term geopolitical risk and longer-term structural demand concerns.

If tariff pressures weigh on global growth, demand forecasts may soften, limiting further upside in crude prices.

Inflation, Policy and Volatility Ahead

Sustained oil strength intersects directly with inflation dynamics. Energy costs influence consumer prices, transportation expenses, and industrial input costs. A prolonged rally could slow disinflation progress and complicate Federal Reserve rate-cut expectations.

Historically, crude oil reached an all-time high of 410.45 in December 2025, underscoring the commodity’s volatility. Current levels reflect risk pricing rather than crisis conditions, but sensitivity to headlines remains elevated.

Looking ahead, oil’s trajectory will depend on three primary variables: the outcome of US–Iran negotiations, the durability of tariff escalation, and macroeconomic data confirming whether demand remains resilient. A diplomatic breakthrough could ease the geopolitical premium, while renewed escalation or sustained trade friction may keep crude prices elevated and volatility high across global markets.