Why Oil prices might skyrocket in 2026

Despite the world’s ongoing green transition, oil retains its importance both as a resource and as an investment.

Looking ahead for 2026, oil prices could rise sharply, driven by a combination of surging AI-related power demand, persistent supply constraints, and renewed geopolitical risks in the Middle East.

Additionally, despite analysts like Naveen Das of Kpler believing supply will outstrip demand in 2026, possibly generating downward pressure, perhaps the only remaining certainty is that the oil market has entered the new year with noteworthy volatility.

Saudi Arabia, in particular, gave investors cause for concern in late December of 2025 as it issued an ultimatum to the United Arab Emirates to disengage from Yemen after accusing the country of supporting separatist groups.

Could Middle East tensions trigger a sharp oil price surge in 2026?

During Saudi Arabia’s 2019 military engagement in Yemen, the Houthis carried out an unprecedented drone attack against oil processing facilities at Abqaiq and Khurais in the eastern parts of the kingdom.

The damage was sufficient to temporarily collapse the world’s oil production by approximately 5%, and triggered a massive, 19% intraday price surge. 

While the market stabilized swiftly following this biggest shock since the 1990-91 Gulf crisis that emerged during Iraq’s invasion of Kuwait, the calming was only achieved by President Trump promising to release the U.S.’ emergency supplies.

Although much has changed since 2019, and there are no guarantees that any Yemeni faction will be able to strike Saudi Arabia’s oil facilities even if the situation escalates, regional instability remains a major concern for global fuel production in 2026.

Why the global oil supply can remain stable in 2026

Still, President Trump’s approach to fossil fuels, exemplified by the ‘drill baby drill’ mantra, could once again ensure price stability even if there are supply-side shocks. Indeed, the expansion of production capacity is likely to ensure there are sufficient reserves for most contingencies.

Even with the dangers in the Middle East and the growing AI energy demands, crude oil prices have been declining for years. 

After surging 582.79% from the pandemic-era lows of $16.62 to the 2022 highs at $113.48, black gold prices have retreated 49.41% by January 1, 2026, to their press time levels at $57.41.

Featured image via Shutterstock