The global energy market in 2025 is defined by a paradox: high geopolitical tension and low energy prices. Despite prolonged conflict in Gaza and recent escalations in Iran, energy prices have remained remarkably stable. Even Europe, once shaken by the Ukraine war, has largely adapted, with gas supplies successfully reoriented. This resilience suggests that the global energy system has matured, capable of absorbing shocks that once would have triggered widespread disruption.
While geopolitical events have occasionally spiked oil prices - such as the surge into the $90s during Middle East tensions in 2022 and 2024 - these have proven temporary. The more enduring trend is a slowdown in demand growth, coupled with a ramp-up in supply. OPEC+, having relaxed its production cuts, is leading the charge, and forecasts suggest a supply surplus by year-end. Unless a major escalation occurs, low prices may persist for several years.
One of the more dramatic policy proposals in recent months has been the threat of imposing secondary tariffs - up to 500 per cent - on buyers of Russian crude, particularly targeting China and India. While the proposal signals a bold geopolitical stance, its implementation would carry significant risks. Severing trade with major economies could trigger market shocks and drive oil prices sharply upward. The decision to delay action by 50 days reflects a strategic pause, likely aimed at pressuring Russia diplomatically without committing to economically disruptive measures.
Beyond supply-side dynamics, demand remains a critical factor. The initial decline in oil prices earlier this year was triggered by tariff threats and sustained by fears of their impact on global growth. Although the U.S. economy has shown resilience, global demand, especially in China, remains a concern. That said, in 2024 demand remained robust.
