In the volatile world of energy markets, oil traders are increasingly betting on upward price movements, driven by escalating geopolitical tensions in the Middle East. The global Brent benchmark has shown a call skew—a premium for bullish call options—for 14 consecutive sessions, while the U.S. crude marker has followed suit for 13 days, marking the longest such streaks since late 2024.
This surge in optimism among traders comes amid heightened risks involving Iran, where internal unrest and U.S. warnings have stoked fears of potential disruptions to global oil supply.
Geopolitical Tensions Fuel Market Anxiety
The current bullish sentiment in oil options trading is largely tied to developments in Iran. Recent protests challenging Supreme Leader Ayatollah Ali Khamenei have resulted in thousands of deaths, drawing sharp international condemnation.
U.S. President Donald Trump has escalated rhetoric, warning of “strong action” and deploying a significant naval presence to the region, emphasizing that the U.S. hopes to avoid conflict but is prepared to act.
These events echo past flare-ups, such as the 2024 Israeli strikes on Iranian targets and the 2023 Hamas attack on Israel, which previously spiked options premiums before subsiding when oil infrastructure remained untouched.
Traders are using options markets as a hedge against these uncertainties, with open interest in Brent call options growing at the fastest rate in at least six years.
Hedge funds have also ramped up net-bullish positions on crude to levels not seen since August, while volatility indicators have hit multi-month highs.
Analysts like Arne Lohmann Rasmussen from A/S Global Risk Management note that the market remains “nervous,” with focus squarely on Iran.
Rapidan Energy Group has upped its estimate of a substantial disruption to Gulf energy flows from 15% to 20%, highlighting the vulnerability of Iran’s 3.3 million barrels per day (bpd) of oil production.
Underinvestment Amplifies Supply Risks
Compounding these geopolitical concerns is a broader structural issue in the oil industry: chronic underinvestment in exploration and production. Global conventional oil discoveries have plummeted from over 20 billion barrels of oil equivalent (boe) annually in the early 2010s to just 5.5 billion boe per year from 2023 through September 2025.
Exploration expenditures have similarly declined, hovering between $50 billion and $60 billion yearly, down from a 2013 peak of $115 billion.
This shortfall means new finds are concentrated in a few hotspots like Guyana’s Stabroek Block and Brazil’s pre-salt basins, dominated by supermajors such as ExxonMobil and TotalEnergies.Nearly 80% of global oil production and 90% of gas come from fields past their peak, with average annual decline rates of 5.6% for oil and 6.8% for gas.
To merely maintain current output through 2050, upstream investment needs to average $540 billion annually—yet projections for 2025 show global oil and gas capex at $735 billion, with upstream at $570 billion, most of which offsets declines rather than fueling growth.
Without ramped-up exploration, the industry faces an 8% annual drop in oil production (over 5.5 million bpd) and a 9% drop in gas, risking severe shortages and price spikes.
In this context, Iran’s risks loom even larger. A disruption to its output could tighten an already precarious supply chain, pushing prices higher and exacerbating volatility. The energy sector is at a “critical junction,” where short-term focus on low-cost projects and renewables leaves hydrocarbons vulnerable, potentially undermining energy security and the transition to net-zero.
Market Implications and Outlook
While short-term oversupply from U.S. shale might cap prices early in 2026, geopolitical escalations could flip the script, leading to inventory drawdowns and recovery in the second half.
Brent prices are forecasted to average around $55 per barrel for the year, but upside risks from events like those in Iran—or even unrelated disruptions, such as recent U.S. actions in Venezuela—could drive rallies.
Investors are eyeing resilient companies with strong cash flows and efficiency, particularly those positioned to capitalize on higher prices or increased activity.
U.S. Companies Investors Should Consider
Amid these dynamics, U.S. oil and gas firms offer opportunities for investors seeking exposure to potential price upswings and geopolitical premiums. Here are key companies to watch, focusing on upstream producers, integrated majors, and service providers that could benefit from rising demand and exploration needs:
ExxonMobil Corp. (XOM): As a leading integrated major, ExxonMobil’s diversified operations, including its dominance in Guyana, position it well for supply tightness. It offers a 3.5% dividend yield and has hit record highs amid market resilience.
Chevron Corp. (CVX): With strong cash flows and a presence in high-growth areas like Venezuela, Chevron stands to gain from production expansions and higher prices, boasting a 9% YTD gain in 2026.
ConocoPhillips (COP): Focused on efficient shale production, this upstream player could see gains from asset recoveries and geopolitical-driven rallies, with significant early 2026 upside.
Occidental Petroleum Corp. (OXY): Known for its Permian Basin assets, OXY’s low breakeven costs make it attractive in volatile markets, with a 2.4% yield and strong P/E metrics.
Halliburton Co. (HAL): As an oilfield services leader, Halliburton benefits from increased drilling activity spurred by risks, showing 18.78% one-year performance and potential for new contracts.
Schlumberger (SLB): The world’s largest oilfield services firm, SLB’s tech-driven approach suits complex projects, positioning it for gains in international and offshore recovery.
Baker Hughes Co. (BKR): With a 22.53% one-year return, BKR’s services in drilling and completions could surge amid exploration needs, especially in strained supply scenarios.
These selections emphasize resilience and growth potential, but investors should monitor evolving risks and conduct due diligence. As the energy landscape evolves, balancing geopolitical awareness with structural supply challenges will be key to navigating 2026.
Michael Tanner and Stu Turley will be covering these companies and putting a summary and charts in tomorrow’s Substack article and podcast.
Check out: theenergynewsbeat.substack.com,
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