Oil and gas markets are likely to stay unpredictable due to geopolitical risks, even though experts expect a stable energy supply by 2026. Non-OPEC countries, including the United States, Brazil, and Guyana, are set to increase energy supplies. Additionally, new LNG capacity from the U.S. and Qatar is expected to help lower prices. Uncertainties like potential conflicts involving Iran and trade disputes between the U.S. and EU over Greenland are creating market volatility. However, U.S.-EU energy supplies, especially LNG, are expected to stay stable because of mutual reliance. Europe depends heavily on U.S. energy, and since China is no longer a major buyer, the U.S. sees Europe as an important LNG market.

Market Fundamentals and Geopolitical Fluctuations

While the market fundamentals suggest lower oil and gas prices in 2026 than in 2025, geopolitical tensions may still cause price swings. OPEC+ is currently holding off on increasing output to avoid oversupply, highlighting the complex dynamics of the global energy market. The close energy relationship between the EU and U.S. makes it unlikely for either side to disrupt LNG flows during trade disputes. The outlook for 2026 indicates a well-supplied energy market, leading to downward pressure on prices. Increased production from the Americas and new LNG capacity from the U.S. and Qatar may create surpluses. This situation favors strategies that benefit from lower prices, like selling call options during price spikes. However, ongoing geopolitical issues are causing significant short-term volatility, complicating this outlook. Recent discussions around tariffs on Greenland prompted a 4% rise in the oil volatility index (OVX) within a week, and any news regarding Iran could lead to quick price changes. Traders should consider using options to navigate this volatility, as sudden news can easily disrupt the overall market sentiment. Despite tariff concerns, the strong energy connection between the U.S. and EU makes it unlikely that LNG flows will be affected. Europe’s dependence on U.S. gas has increased, with record imports in 2025, and the U.S. sees Europe as a key market. As a result, any dips in Henry Hub natural gas futures due to tariff news might offer good buying opportunities.

Adapting Trading Strategies

Given these mixed signals, a flexible trading strategy is essential for the coming weeks. Although the overall trend may be downward, the road ahead will be bumpy, with high implied volatility in front-month crude contracts near a seven-month peak. This situation suggests that strategies like selling strangles to capture high premiums could work well, provided traders manage risk carefully in case of a major geopolitical event. Create your live VT Markets account and start trading now.

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