M. Juan Szabo [1] y Luis A. Pacheco [2]
Published Originally in Spanish in LA GRAN ALDEA
In the 20th century, it was taken as gospel that political instability in the Middle East drove oil prices higher, primarily because developed nations relied on that region to meet their demand. As the 21st century has unfolded, the pieces on the energy chessboard have shifted to new positions, and market behavior has been very different. However, the large-scale military operation launched by the U.S. and Israel against Iran on the morning of February 28, 2026, and Tehran's immediate response with attacks across the region, put that new market paradigm to the test.
Although the timing of the attack coincides with the Jewish celebration of Purim—commemorating the salvation of the Jewish people from an extermination plot in ancient Persia—and with the month of Ramadan, a pillar of Islam for reflection and closeness to Allah, what is reported is that the long-planned attack was brought forward because a window of opportunity arose to eliminate the high command of the Islamic Republic of Iran.
The Pentagon and the Israel Defense Forces (IDF) have struck ballistic missile sites, nuclear facilities, and command centers of the regime. Israel claims to have carried out "decapitation" strikes against key regime figures, which enabled the elimination of Supreme Leader Ali Khamenei. Israeli intelligence detected a meeting of Khamenei with a significant number of high-ranking regime figures at his residential compound and, immediately, in broad daylight, the Israeli air force bombed the building, killing most of those in attendance. The news was officially announced in Iran, and the process to elect a new leader began.
President Donald Trump, upon announcing the start of the strikes, urged the Iranian people to "take control of your government," declaring that "the time for your freedom has come."
Iran has responded by launching waves of missiles and drones, not only against Israel, but also against U.S. bases in several allied countries: Bahrain, Qatar, UAE, Kuwait, Jordan, and even the British military base in Cyprus, in attacks that are surely part of a pre-determined response. Explosions have also been reported near residential areas in Dubai, Doha, and Kuwait. Iran has declared that all U.S. assets in the region are "legitimate targets."
Most airlines have suspended flights throughout the Middle East, and oil and LNG traffic through the Strait of Hormuz has come to a near standstill, having a considerable impact on the oil market and an even greater one on the liquefied gas market. It is important to note that 30% of globally traded crude passes through the Strait of Hormuz.
A Situation That Lays Bare the Market Narrative
The military preparations that have culminated in the attacks, which now draw almost the entire Middle East into the conflict, not only affect but also shape the oil market's perception of the future. Indeed, the military escalation between the U.S. and Iran and its potential impact on oil supply are calling into question the prevailing narrative that a global crude surplus exists. In fact, it is now considered that the recent production increase announced by OPEC+, if it materializes, is at best a counterweight to possible supply disruptions in the region. As if that were not enough, the formal declaration of "open war" between Pakistan and Afghanistan has further complicated the geopolitical situation in the region.
Oil prices thus close out February and begin March on a positive note for petroleum "bulls," with gains during the last trading week of the month, and promise to continue on the same course for the week ahead. Amid this war scenario, OPEC+ announced its decision to increase production by 206 MBPD starting in April, as a measure to mitigate the effects of the regional war. However, the cartel's ability to follow through is questioned.
OPEC+ Production Increase Approved for April 2026
PAÍS | INCREMENTO MBPD | CUOTA MBPD |
Arabia Saudita | 62 | 10.166 |
Rusia | 62 | 9.637 |
Irak | 26 | 4.299 |
EAU | 18 | 3.429 |
Kuwait | 16 | 2.596 |
Kazajistán | 10 | 1.579 |
Argelia | 6 | 977 |
Omán | 5 | 816 |
Total | 206 | 33.499 |
In any case, both baseline production and potential increases from Persian Gulf countries are subject to the constraints that the Strait of Hormuz may impose, beyond preventing tanker entry into the Gulf, which is already occurring. A buildup of tankers is already visible at both ends of the strait, and insurance companies have limited their coverage for those who decide to transit the Strait of Hormuz. The Iranians are broadcasting messages to vessels urging them not to pass through.
On the same geopolitical plane, events in Iran could reverberate in the other conflict zone, Russia and Ukraine, since the Khamenei regime is one of the main suppliers of military drones to Russia. Indeed, Russia's invasion of Ukraine marked its fourth anniversary: a shameful milestone accompanied by more than one million military and civilian deaths and injuries, and severe deterioration of both countries' economies. Nor should it be overlooked that the U.S. role as mediator in that conflict is losing weight, given its involvement in the Middle East conflict.
A Ukrainian drone attack on a critical pumping station in the Russian region of Tatarstan has disrupted the flow of crude to Hungary and Slovakia via the Druzhba pipeline. The disruption has forced both countries to activate their strategic reserves and seek alternative routes, such as importing non-Russian crude through the Adria pipeline from Croatia.
The global situation is one of extreme danger, as three or perhaps four nuclear-armed powers are involved in these regional conflicts and cannot entirely dismiss the risk of a miscalculation or wrong decision. It must not be forgotten that, although China has said little, a disruption of Iranian crude supply would have a disproportionate impact on its economy.
It is very difficult to speculate about the future of this conflict and its medium-term impact on the energy market—every twelve hours, we are surprised by events that were not on our radar. Nevertheless, President Trump has already hinted that the military operation may last four to five weeks, but that he is prepared for a longer duration.
Fundamentals
Given the magnitude of the military conflict that is only just beginning, the week's oil market fundamentals take a back seat to the increase in geopolitical risk, primarily driven by uncertainty.
In any case, we observe that the materialization of the projected increase in oil supplies is being delayed. Likewise, the more modest demand increase forecast by the IEA and banks appears to have diminished. Many analysts have noted both changes. For instance, the highly prestigious investment bank Goldman Sachs raised its Brent crude price forecast by $6, placing it at $60/BBL for the fourth quarter of 2026, even before the weekend's events. Of course, it is also not easy to predict the impact on demand of a sustained rise in energy prices.
OPEC+ is producing below its targets; the producers that analysts had flagged to increase crude supply have barely met the quantitative increases corresponding to the incorporation of newly announced fields. The lack of sufficient investment in base production is manifesting as an increase in decline rates, offsetting gains from new fields, typically in Brazil.
The U.S. keeps its production steady, at least for now. As for its commercial crude inventories, the Energy Information Administration (EIA) reported a significant increase of 16 million barrels. However, there appears to be a methodological issue, as the reports show outsized increases and reductions in inventory in recent weeks. As we indicated last week, we tend to wait for a trend to be established before validating the indicator. In any event, the market showed no reaction to the announcement.
Crude Oil Price Dynamics
During the last week of February 2026, oil prices experienced significant volatility, driven primarily by the escalation of geopolitical tensions and the delay or mitigation of the projected overproduction. At the close of the week, prices rebounded strongly following reports of the imminence of multiple military activities.
The situation points to two extreme scenarios: one of a war that could drag on for weeks, causing serious damage to the region's oil infrastructure and thus raising prices considerably; and another in which the Iranian regime falls and, after a chaotic transition, a pseudo-normalcy returns with a relatively rapid return to production levels and, eventually, the lifting of sanctions. In this latter scenario, oil supplies would increase and weigh on prices, with greater volatility and a medium-term reduction.
Benchmark crude Brent and WTI, at market close on Friday, February 27, 2026, were trading at $72.87/BBL and $67.02/BBL, respectively, reflecting an increase of approximately 1.5% compared to the previous week's close.
Note: At press time, Brent crude was trading at $77.47/bbl (+6.31%), having briefly approached $80/bbl during the session.
Venezuela
Recovery Without a Democratic Transition Can Only Be Partial
Although the Venezuelan situation remains dynamic, politically, economically, and in terms of oil, it was overshadowed internationally by the magnitude and potential repercussions of the Middle East conflict.
Political Situation
Politically, ambivalent moments are being experienced regarding repression and human rights. While the release of several imprisoned military personnel was confirmed and the remodeling of the Helicoide prison began for purposes other than detention and torture, at the same time, the regime's repressive forces confiscated the home of one of María Corina Machado's closest collaborators and detained activists from her VENTE party. It would appear that one head of the hydra that is the regime is trying to adapt to U.S. oversight, while another head seeks to maintain control through targeted repression. Nevertheless, protests of a different nature, mainly over wages, have taken place in several states across the country.
At the same time, the Attorney General and the People's Ombudsman, the main instruments of judicial repression, submitted their resignations, possibly as part of the transformation the regime seeks to project. Likewise, the interim president dismissed Alex Saab's wife from her ministerial post. According to rumors, other reshuffles may be in the works involving Interior Minister Diosdado Cabello and Defense Minister General Vladimir Padrino.
Somewhat surprisingly, at the annual "State of the Union" address, President Trump, in his now-familiar practice of highlighting key personalities to underscore annual achievements, introduced Enrique Márquez, one of the marginal candidates in the 2024 presidential elections and former vice president of the National Electoral Council (CNE). Márquez attended as a guest of honor, having recently been released from detention in Venezuela.
Several theories arose from this introduction: one that he was being presented as a qualified candidate to head a new CNE, and another that he was being positioned as a transitional figure until the general elections. The latter would clearly not sit well with the opposition, which represents the majority of Venezuelans. Still, it could be a card played by the interim regime and the "opposition" represented in the National Assembly, to divide and weaken the majority opposition.
Economic Situation
On the economic front, some progress was made, though not without setbacks. The International Monetary Fund (IMF) classified Venezuela as a country of "intense fragility," an unflattering designation but useful for accessing special emergency financing and enabling certain financial transactions. These allowances are attributed to the stewardship of Treasury Secretary Scott Bessent.
Nearly $950 million was auctioned between January and February, with some difficulties in meeting the requirements of all phases of the fund flow. To reduce complications, hydrocarbon sale revenues will no longer need to pass through Qatar; they will flow directly to protected accounts at the U.S. Treasury Department. In fact, part of the March deliveries has already been received.
Delays in implementing the foreign exchange auctions made it difficult to close the gap between the official and market exchange rates; despite the auctions being conducted at rates very close to the parallel market rate, the gap remained above 40%. The official rate closed the week at 420 Bs./$, representing a 4% weekly devaluation and 39% so far this year.
The most relevant news from an oil perspective were: first, the suspension of the auction of equipment belonging to U.S. company Halliburton that had been confiscated—the change came as a result of U.S. intervention to facilitate the smooth return of one of the largest and most wide-ranging service companies in the world; and second, the rumor of the suspension of 19 production sharing contracts (CPPs) signed before January 3, mostly awarded by Delcy Rodríguez.
Apparently, the suspension may be due, among other reasons, to the contractors' financial and operational capacity and the origin and relationships of their owners and shareholders, which prevent these agreements from qualifying for OFAC-issued licenses. It is rumored that the review of the contracts is being conducted by a working group comprising U.S. Treasury technicians and PDVSA personnel.
It is thus clear that production increases over the coming months will be limited to investments made by currently active companies: Chevron, Repsol, Maurel & Prom, and possibly ENI, which is still weighing its options. In the specific case of Maurel & Prom, the recovery could be faster than anticipated, given that the first rig, the Maritime 42, has already been refurbished and is on its way to Urdaneta Oeste.
Oil Operations
Production was partially affected by power outages, unlike refining, which increased compared to the previous week. Representatives of Halliburton and other service companies have been establishing contacts with local firms to incorporate them into activities in the hydrocarbon sector and related activities.
Representatives of Shell met with the interim president to accelerate the development of the Dragon Field to supply natural gas to Trinidad, specifically to the Atlantic LNG plant. Shell indicated that its objective is to bring the field into production by the end of 2027.
Weekly Production
Occidente | 243 Mbpd (Chevron: 102) |
Oriente | 111 Mbpd |
Faja del Orinoco | 526 Mbpd (Chevron: 138) |
TOTAL | 880 Mbpd (Chevron: 240) |
National refineries processed 237 Mbpd of crude and intermediate products, yielding 79 Mbpd of gasoline and 70 Mbpd of diesel. The increase is mainly due to the startup of the distillation unit at El Palito.
According to the U.S. Secretary of Energy, by the end of February, revenues from the sale of Venezuelan hydrocarbons totaled $2.3 billion, averaging $53/bbl.
Among the notable features of February exports is the first Chevron sale outside U.S. territory, with a cargo sold to India. Additionally, 80 MBPD was sent to Europe and 20 MBPD to Israel. Chevron's total sales were 270 Mbpd, accounting for 36% of total exports of 736 Mbpd in February. However, 160 Mbpd dispatched remains as floating inventory and will therefore have no impact on revenues.
The increase in international prices raised the Venezuelan basket price to $59.2/BBL.
[1]: International Analyst
[2]: Nonresident Fellow Baker Institute
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