Oil prices extended gains this week as rising geopolitical tensions and aggressive trade rhetoric from U.S. President Donald Trump rattled global markets and dampened investor risk appetite.
Fresh U.S. tariff threats layered onto existing geopolitical concerns have become a key driver of price movements. Trump’s hardline stance on Greenland, coupled with retaliatory signals from European leaders, reignited fears over global energy supply security and broader economic disruption.
Over the weekend, Trump announced that eight European countries would face new tariffs for opposing U.S. plans to acquire Greenland, framing the dispute as a threat to global peace. Imports from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland will be subject to a 10% tariff starting February 1, with the rate set to rise to 25% on June 1 if no agreement is reached.
Tensions escalated further following reports that French President Emmanuel Macron was reluctant to join Trump’s proposed “Board of Peace for Gaza.” In response, Trump threatened to impose a 200% tariff on French wines and champagne, adding another layer of uncertainty to already strained transatlantic relations.
However, prices softened slightly after the announcement of a potential NATO-led deal that could allow negotiated access to Greenland, easing immediate supply concerns.
As geopolitical and trade risks intensified, worries over energy supply stability prompted increased buying in the oil market. Investors appeared to price in the risk that prolonged disputes could disrupt trade flows, investment decisions, and ultimately energy availability.
The broader risk-off mood spilled into other asset classes. Demand for safe havens pushed gold prices to record highs, while U.S. Treasury bonds came under selling pressure. Meanwhile, the U.S. dollar index extended its decline. A weaker dollar typically supports dollar-denominated commodities like oil, making them cheaper for buyers using other currencies and providing additional upward momentum.
Beyond geopolitics and trade, markets are also focused on the future leadership of the U.S. Federal Reserve. Speaking in Davos, U.S. Treasury Secretary Scott Bessent said Trump could announce his nominee to succeed current Fed Chair Jerome Powell as early as next week.
Expectations that the Federal Reserve will maintain a low-interest-rate environment, combined with forecasts for economic growth and stronger oil demand, have continued to support crude prices. Analysts note that a Fed chair aligned with Trump’s preference for low rates could be welcomed by markets in the short term, though it may raise longer-term concerns over central bank independence.
For now, a mix of geopolitical uncertainty, trade tensions, monetary policy expectations, and currency dynamics is keeping oil prices on an upward trajectory—underscoring how tightly energy markets remain linked to global political developments.
Fuel card prices are expected to rise by 1 pence per litre next week.
