Oil Markets Brace for Geopolitical Risk This Week

Despite growing uncertainty around the U.S. labor market and signs of potential economic weakness, oil markets have remained resilient over the past month, trading within a relatively narrow range and using the $65 level as a key area of support.

This stability comes amid a self-imposed deadline by President Donald Trump to force a resolution or steps towards a resolution between Russia and Ukraine by this Friday. Failure to reach a deal could trigger disruptions in global energy flows, as Trump has threatened to impose additional tariffs on countries that continue purchasing Russian oil—arguing that such purchases help fund Russian military operations.

Since the onset of the conflict, India has significantly increased its energy imports from Russia—not only for domestic consumption but also allegedly serving as an intermediary to reroute Russian oil into global markets. This is often done through so-called “shadow fleet” operations, which utilize older tankers with opaque ownership structures. In some cases, these vessels reportedly spoof location data to evade international sanctions.

While initially intended as a short-term solution to meet energy demand in Asian markets, these operations have evolved into a critical component of both the Russian and Indian economies. India’s Ministry of External Affairs has pushed back against pressure from the U.S. and European Union, stating that “The United States at that time actively encouraged such imports by India for strengthening global energy markets' stability” at the beginning of the war.

If the U.S. proceeds with imposing substantial tariffs on India for its continued energy trade with Russia, it could dramatically shift the global trade dynamic. Should India comply, the resulting reduction in heavy sour crude exports—Russia's primary export grade—could tighten global oil inventories and push prices higher, especially following OPEC's decision on Sunday to raise output quotas.

With the deadline looming, Friday could prove to be a pivotal day for energy traders navigating this complex geopolitical landscape.