Global oil markets witnessed a sharp rally on Monday, with prices climbing more than a dollar per barrel. The surge was triggered by escalating geopolitical tensions in Eastern Europe and renewed instability in the Middle East, raising fresh concerns over potential disruptions to global crude supplies.
Geopolitical Flashpoints Drive Market Volatility
Brent crude futures, the international benchmark, rose by $1.30, or 2.1%, to settle at $61.94 a barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude gained $1.34, representing a 2.4% increase, to close at $58.08. The price jump reflects a market on edge, reacting to developments that could directly impact the flow of oil.
The most immediate catalyst was a fresh accusation from Russia against Ukraine. On Monday, Moscow claimed that Ukraine launched a drone attack targeting President Vladimir Putin's residence in northern Russia. In response, Russia stated it would review its position in ongoing peace talks. Ukraine swiftly dismissed these statements, with its foreign minister alleging that Moscow was seeking "false justifications" for further military action.
This incident cast a shadow over recent diplomatic progress. Just prior to the drone claims, Ukrainian President Volodymyr Zelenskiy indicated that significant progress had been made in talks with U.S. President Donald Trump. Both sides agreed that U.S. and Ukrainian teams would meet the following week to finalise issues aimed at ending the war.
Middle East Instability Adds to Supply Worries
Simultaneously, the oil market's focus shifted towards the Middle East, particularly Yemen. Energy consultancy Gelber & Associates noted in a client update that "fresh instability, including Saudi air strikes in Yemen, is keeping supply-disruption headlines in play."
The situation in Yemen's eastern province of Hadramout intensified. The Saudi-led coalition warned that any military moves by the main southern separatist group, the Southern Transitional Council (STC), undermining de-escalation efforts would be met with force to protect civilians. This warning came after an escalation of fighting on Thursday that killed two members of the STC's Hadhrami Elite Forces. Saudi airstrikes targeted STC forces in the area early on Friday, according to a source familiar with the events.
Market Fundamentals and Inventory Watch
Beyond geopolitics, underlying market factors are providing support. UBS analyst Giovanni Staunovo pointed to strong Chinese waterborne crude imports as a factor helping to tighten global oil markets. He added that $60 a barrel appears to be a soft floor for Brent prices, with a slight recovery expected in 2026 as non-OPEC supply growth is likely to stall mid-decade.
Oil trading advisory firm Ritterbusch and Associates commented, "Unless Russia surprises the world by backing away from previous demands regarding territory and security guarantees, we are looking for the complex to edge higher through the rest of this week and next week."
Traders also awaited key U.S. inventory data. The release of the report for the week ended December 19, initially scheduled for 10:30 a.m. ET on Monday, was delayed without a new publication time. An extended Reuters poll indicated expectations of a draw in U.S. crude oil stocks for that week, while distillate and gasoline inventories were forecast to rise.
