25.02.2026

Andriy Zakrevskyi. CEO of Newfolk oil&gas. Deputy Director of the Ukrainian Energy and Natural Resources Association
Viacheslav Hrabovskyi. Oil and gas analyst at Newfolk oil&gas

Today, we are witnessing a unique moment in the history of energy markets. According to all the canons of the 20th century, the events surrounding Iran in February 2026 should have caused a price explosion similar to the crises of 1973 or 2011. However, Brent stubbornly remains in the $60–75 range. Why does the classic geopolitical premium no longer work as an automatic trigger?

The crisis of the classic risk premium theory

The main change in market architecture is that the world has moved from the paradigm of ‘will we have enough oil?’ to the paradigm of ‘will we be able to unload it in time?’ We are not dealing with a physical shortage of raw materials, but with logistical viscosity.

Today's geopolitical shock is offset by a colossal oversupply that is simply stuck in transit. And modern trading systems and hedge funds no longer react to news headlines as emotionally as people do. They analyse satellite data on tanker movements and see a real surplus that ignores political rhetoric.

Paper Brent lives on the news cycle, but the physical market continues to signal oversupply. Any attempt to raise the price above $80 is instantly met with logistical inertia. Traders understand that if the Strait of Hormuz is not physically blocked for a long time, then the lock on the market is not production, but the throughput capacity of logistics hubs.

Today, the geopolitical premium is not a gift to exporters, but a burden on logistics. The world is now more afraid of suffocating from its own oil than of losing some of it as a result of conflict.

Anatomy of an oil dam

Having figured out why the risk premium does not work, let us find the answer to the question of what exactly is holding back the market. The concept of an oil dam is a colossal volume of oil that has already been physically extracted but is blocked in logistics chains.

As of February 2026, total maritime oil reserves reached a peak of 240-260 million barrels. For comparison, in the normalised year of 2021, this figure ranged from 90 to 110 million. This volume is a direct consequence of longer routes. When a tanker travels from the Baltic to India not in 10 days via Suez, but in 45 days around the Cape of Good Hope, the effective volume of oil in transit increases in proportion to the delivery time — in fact, by 4.5 times.

We are seeing the effect of a sluggish market, where oil moves slowly, creating inertial mass that puts pressure on prices. Therefore, this dam prevents prices from rising. These 250 million barrels are a mothballed surplus. Any halt in production in Iran of 1–1.5 million bpd is instantly offset by the unloading of part of this dam. Traders see thousands of tankers waiting to unload in the harbours of Singapore, Malaysia and Gujarat. Also, much of this oil is in the hands of the shadow fleet. For the owners of these old ships, every extra day of waiting means losses. They will be the first to dump oil at any price as soon as the slightest window of opportunity appears.

Oil in tankers is essentially frozen working capital. At current interest rates, holding such a volume is becoming too expensive. The price wants to go up on the news, but the physical mass of oil that needs to be disposed of urgently is pulling it down. The oil backlog is so large today that any geopolitical surge only reinforces the desire of tanker owners to finally open the valves.

Weakening Indian demand for Russian oil

Over the past three years, India has acted as a global importer for Russian oil, but as of February 2026, this mechanism began to malfunction, radically changing the rules of the game.

After 2022, India de facto saved Russian exports by increasing purchases from 1–2% to a peak of 1.5–2.2 million barrels per day. The scheme was perfect: discounted oil enters giant refineries (such as Reliance's Jamnagar complex), is processed and enters the world market as neutral diesel.

In February 2026, Russian oil imports to India fell to 1.1 million barrels per day. This was the result of increased pressure from the US and new trade agreements that forced Delhi to diversify its supplies in favour of American and Venezuelan oil.

The million barrels have not disappeared. They have simply replenished the same dam in the ocean that we talked about earlier. The best indicator of this is the price gap. When Brent is trading at $72 and Urals in Baltic ports (FOB) is trading at $44, we have an abnormal spread of $28. Previously, this discount was in the range of $8–15. Such a widening of the spread indicates that logistics costs and risks have become so high that Indian refineries can no longer process these volumes, even at a large discount.

The problem is not only with tankers, but also with delayed payments. The use of rupees, dirhams and yuan instead of dollars has created currency traps. Capital in the oil sector has become less mobile. Money is stuck, just like oil in tankers.

Therefore, India can no longer act as an endless absorber of discounted oil. When the filter narrows, excess oil begins to seek an outlet anywhere, creating enormous pressure on Brent prices. Supply is putting so much pressure on logistics that any geopolitical flare-up will only be an excuse for a large dumping of barrels.

Military escalation in Iran: will prices go up or down?

Why direct military escalation around Iran in 2026 may not cause prices to soar, but rather trigger their collapse. When the first shots are fired, we will inevitably see an emotional surge. Brent futures prices could instantly soar to the $80–90 range on algorithms that respond to the keywords ‘war’ and ‘Persian Gulf.’ However, in 2026, this surge risks being the shortest in history.

As soon as large funds are confronted with the reality of overloaded tankers already standing in the roadstead (the same 250 million barrels), the psychology of fear of shortage will instantly change to fear of overloaded longs. Traders will realise that they are holding expensive contracts in a market that is physically drowning in oil. A panic closure of positions will begin, turning the correction into a collapse.

War always means higher insurance and freight costs (predicted to be 25-40%). But here's the logic of 2026. The end consumer cannot pay indefinitely, and $80 per barrel is starting to put pressure on the real sector. As delivery becomes more expensive and the final price is capped, the exporter (Russia, Iran or even Saudi Arabia) is forced to lower the price at the point of shipment (FOB) in order to sell the barrel at all. Thus, the war eats into the producer's margin, pushing down the weighted average price of the global basket.

Blocking the Strait (17-20 million bpd) is an apocalyptic scenario with a low probability. China, the main consumer of Iranian oil, simply will not allow Tehran to block its main energy channel. A more realistic scenario is ‘managed tension,’ which only exacerbates the inertia of accumulated barrels.

Therefore, a possible war in 2026 will not create a deficit but rather an opportunity to shed ballast. The military shock will turn into a short-term episode, after which the physical market will inevitably test the price to the real level of demand.

The $60–70 corridor as the new norm

The $60–70 per barrel Brent corridor is the point of equilibrium between excess logistical mass and the need to maintain investment in production.

According to forecasts, global oversupply in 2026 could reach unusually high levels and, combined with accumulated transit stocks, exert sustained pressure on the lower price limit. Even with a drop of 1.0–1.5 million bpd in Iranian exports, the market has an internal reserve of 60–120 million barrels of flexible supply on water. Their unloading within 30–60 days adds +1.0–3.5 million bpd to the system, which is more than enough to compensate for any local disruptions.

Conclusions:

1. The decisive factor for the price is not the war itself, but the degree of disruption to flows. If the conflict only changes routes (making them longer), it only increases the volume of oil in the ‘oil dam’, paving the way for the next price collapse.

2. The $60–70 hypothesis looks stable even with escalation. Short-term spikes to $80–85 are possible, but they will be cut short by a physical surplus of oil looking for unloading.

3. The 2026 market is structurally more afraid of stockpiling than short-term shocks. This is a fundamental change in trading psychology.

Sources

1. IEA: Global demand and supply forecasts for 2026 (base surplus of 4 million bpd).

2. MarineTraffic / Satellite Data: Data on tanker density and floating storage volumes as of February 2026.

3. Argus / Platts: Urals (FOB) and Brent (Dated) price quotes for calculating spreads.

4. Newfolk Oil & Gas: Internal analytics of logistics chains and refineries in India (Andriy Zakrevskyi).

5. Bloomberg Energy: Data on hedge fund open positions in oil futures.

Note: Current Brent ($72) and Urals ($44) prices are as of 21-22 February 2026. Any changes in the geopolitical situation may require adjustments to logistics coefficients.