Oil Prices and Geopolitics: Will Supply Shocks Drive Crude Higher?

Most people say oil makes the world go round, but its real power lies in how it impacts global markets. In 2025, several complex and unpredictable forces are influencing oil prices. Do you want to know them? As an oil trader, do you want to understand the connection between geopolitics and oil markets?

In this article, we will break down the biggest supply shocks in history and analyze the key players controlling crude oil markets. We will also explore the risks of market overreaction in oil trading. Additionally, we will elaborate on how to anticipate market moves using institutional order flow and liquidity heatmaps, which are offered by our modern market analysis tool, Bookmap. 

Let’s uncover what moves crude oil and who’s really pulling the strings.

How do Geopolitical Tensions Influence Oil Markets?

Geopolitical conflicts and policy decisions are two major factors that can:

• Disrupt the crude oil supply chains 

and

• Cause price fluctuations.

Check out the graphic below to learn about events that often lead to energy market volatility:

For more clarity, let’s check out some major supply shocks in history that illustrate a deep connection between geopolitics and oil markets.

Historical Examples of Supply Shocks

In the past, oil markets have faced major disruptions due to geopolitical events. These supply shocks have led to sharp price swings that have impacted industries and consumers worldwide. Let’s study some of the notable examples:

1. The 1973 Oil Embargo

In response to U.S. support for Israel during the Yom Kippur War, Arab oil-producing nations imposed an embargo. They cut crude oil supply to Western countries. This led to a global energy crisis, causing oil prices to quadruple within months.

2. The Gulf War and Oil Price Spikes in the 1990s

When Iraq invaded Kuwait in 1990, global oil markets reacted with panic. The conflict threatened Middle Eastern oil exports. This caused oil prices to double within a few months. This energy crisis clearly shows the vulnerability of oil markets to regional instability.

3. Russia’s Invasion of Ukraine (2022)

The war in Ukraine triggered severe economic sanctions against Russia, a major oil producer. This disrupted global oil supplies and pushed oil prices above $120 per barrel. 

Moreover, the resulting uncertainty led to increased trading in oil futures. This happened because investors tried to hedge against further price swings.

4. OPEC+ Production Cuts

The Organization of the Petroleum Exporting Countries (OPEC) and its allies (known as OPEC+) have a history of adjusting oil production to influence prices. They do so by:

• Reducing supply during economic downturns 

or

• Cutting production when price slumps.

In the past, OPEC+ has played a key role in stabilizing or boosting oil prices.

Current Geopolitical Risks in 2025 

In 2025, it is expected that geopolitical tensions will continue to influence oil markets and create uncertainty for traders and investors. Let’s check out some major factors that can influence crude oil supply and demand in 2025:

Make informed trading decisions with Bookmap’s live market visualization tools for energy markets.

U.S. Policy on Energy Exports

In addition to the above factors, the U.S. has become a major player in global oil markets. It is now exporting crude and liquefied natural gas (LNG) to international buyers. 

If the U.S. government changes its policies, such as limiting exports to control domestic fuel prices, this could disrupt global oil supply chains. Thus, as an investor or analyst, you must closely watch U.S. energy policy shifts. That’s because they could significantly influence oil prices in 2025.

The Players Who Set Oil Prices Behind the Scenes 

Oil prices aren’t just determined by supply and demand. They are influenced by:

• Powerful organizations,
• Governments, and
• Market forces.

Please note that from OPEC to energy traders, several key players influence crude oil prices behind the scenes. Let’s understand how:

Historical Supply Shocks That Shaped the Oil Market

Over the decades, geopolitical events have caused major crude oil supply shocks. Primarily, they have led to sharp price swings. Below are some supply shocks that shaped the oil market in the past:

a) The 1973 Oil Embargo

In the Yom Kippur War, the U.S. supported Israel. In retaliation, OPEC imposed an oil embargo on the U.S. and other allied nations. This sudden supply cut caused crude oil prices to quadruple. It led to:

• Widespread fuel shortages 

and

• The first major energy crisis.

b) The Gulf War (1990-1991)

When Iraq invaded Kuwait in 1990, global oil markets reacted with panic. Kuwait (a major oil exporter) saw its production come to a halt. Also, there were fears of further Middle East instability. This drove crude prices up by nearly 150% in just a few months.

c) Russia’s Invasion of Ukraine (2022)

Russia attracted several Western sanctions following its invasion of Ukraine. Since Russia is one of the world’s top oil producers, these sanctions caused markets to experience a severe supply crunch. It pushed oil prices above $120 per barrel. 

This energy market volatility forced countries to seek alternative suppliers. Also, it led to increased interest in trading oil futures as investors tried to hedge against price uncertainty.

d) OPEC+ Production Cuts (Various Years)

“OPEC+” is a coalition of OPEC members and allies like Russia. It has repeatedly adjusted oil production to influence prices. In April 2023, it launched a surprise round of production cuts. These cuts tightened global supply and caused oil prices to surge. 

It is expected these coordinated moves will continue to impact oil prices in 2025. Thus, as a trader, you must closely watch OPEC+ decisions to anticipate future market shifts.

OPEC+ vs. The Rest of the World

Be aware that OPEC+ plays a major role in setting oil prices. That’s because its member nations control about 40% of the world’s crude oil supply. The group adjusts production levels to influence market trends. See the graphic below to learn how:

For example, 

• In April 2023, OPEC+ unexpectedly announced a production cut.
• This led to a 6% jump in crude oil prices overnight. 
• This move caught markets off guard.
• It clearly highlighted OPEC+’s ability to create energy market volatility.

Now, looking ahead to oil prices in 2025, analysts are debating whether OPEC+ will:

• Introduce deeper cuts to sustain high prices, 

or

• Focus on maintaining market share amid growing competition from non-OPEC producers like the U.S. and Canada.

Understand where big players are positioning in oil markets using Bookmap’s heatmap.

Can U.S. Shale Keep Prices in Check?

The U.S. shale oil industry has been a game-changer in global oil markets. Shale producers in Texas and other regions can ramp up production quickly when prices rise. Historically, this ramp-up has prevented crude rallies from getting out of control.

For example, 

• During the 2014 fracking boom, U.S. shale output surged.
• This disrupted OPEC’s pricing power.
• It forced the cartel to rethink its strategy. 
• Consequently, there was a significant decline in crude oil prices.
• This proves that shale production could challenge OPEC+’s dominance.

However, in 2025, rising capital costs and stricter environmental regulations may slow down shale growth. The big question is whether U.S. shale can continue offsetting OPEC+ production cuts!

China and India: The Demand for Wild Cards

China and India have become two of the largest oil consumers in the world. Their growing energy needs significantly influence oil markets (particularly in times of economic expansion). However, this story has both positive and negative sides:

With so many uncertainties in play, you must closely watch these demand wild cards. This will help you to determine the next major move in oil markets. 

Spotting Market Moves Before the Rest

In oil trading, timing is everything. Most professional traders use advanced tools and strategies to anticipate price moves before they happen. Check out the graphic below to learn how you can stay ahead of big price swings:

Let’s understand in detail:

Reading the Order Book in Oil Futures

The order book in oil futures markets shows real-time buy and sell orders placed by traders. Be aware that most large institutions often position themselves ahead of major market shifts. By spotting their moves, you can gain early signals.

For example, 

• Say a sudden wave of large-limit buy orders appears in the market.
• Now, it could indicate that big players expect a crude oil supply shock or price surge. 
• Usually, this kind of activity occurs before geopolitical events or major OPEC+ announcements that affect oil prices.

The Importance of Absorption in Price Action

Most traders use our avant-garde liquidity tool, Bookmap. Its “heatmap” allows them to visualize where large buy and sell orders are clustering. These zones act as important support or resistance levels.

For example, 

• • Suppose oil prices are about $90 per barrel.
  • Massive buy orders are concentrated around $85.

• This suggests that traders believe $85 is a strong support level. 

• Now, if prices drop, buyers at this level may absorb selling pressure.
• This will prevent a deeper decline.

By understanding these liquidity zones, you can manage risk and anticipate market moves.

Fluctuations in Open Interest as a Signal

Open interest represents the total number of outstanding oil futures contracts. A sudden rise in open interest often signals strong market conviction. Usually, this conviction precedes large price moves.

For example, 

• Say OPEC+ announced a production cut.
• Now, if speculative traders start piling into long positions, open interest will surge.
• This surge indicates confidence in higher oil prices. 

Unexpected Shocks: What Could Send Oil in Either Direction? 

Global events significantly impact oil prices. It has been observed numerous times that unexpected shocks can trigger massive price swings. Let’s study some unexpected shocks that can influence oil prices:

Where’s the Next Big Catalyst?

Several likely events could cause energy market volatility in 2025. They can push oil prices sharply higher or lower. Some major ones are:

• Middle East Escalation

• • • A sudden geopolitical conflict in a major OPEC nation could disrupt the crude oil supply.
    • It can lead to an overnight price surge. 
    • Even past events (like attacks on oil infrastructure in Saudi Arabia) have caused immediate market reactions.

• Major Energy Policy Shifts

• • • If the U.S. reinstates oil export bans (to protect domestic supply), it could reduce global crude availability.
    • This will push prices higher. 
    • On the other hand, policies promoting increased production could send prices lower.

• Economic Slowdowns

• • If the economies of China or the U.S. contract sharply, oil demand could collapse.
  • This will cause crude prices to drop. 

Overreaction Risks: Can Oil Markets Overshoot?

Most oil traders have witnessed extreme price movements before. In those events, speculation drove prices far beyond fundamental levels. For example,

• In 2008, oil prices soared to $147 per barrel.
• They were driven by fears of tight supply and speculative buying. 
• However, as the financial crisis deepened, demand collapsed.
• As a result, oil plunged below $40 per barrel within months.

The Role of Speculative Trading

Trading oil futures can sometimes exaggerate price movements. When traders expect prices to rise, they aggressively buy futures contracts. This creates artificial demand. Similarly, panic selling drives prices down faster than real-world supply and demand justify.

Conclusion 

A mix of geopolitical risks, economic trends, and market forces will influence oil prices in 2025. Tensions in the Middle East, OPEC+ production decisions, and Russia’s oil strategy will specifically impact crude oil supply. At the same time, China and the U.S. economy will drive demand. 

For you as a trader, understanding institutional order flow is key to spotting market moves before they happen. To do so, you can use our market analysis tool, Bookmap’s liquidity heatmap. Using it, you can learn where large buyers and sellers are positioned. Track real-time liquidity in crude oil futures with Bookmap’s advanced order flow analysis.