The global energy market experienced a sharp recalibration Monday as crude oil prices retreated from one-month highs following official statements from the Iranian government claiming that widespread civil unrest, which had gripped the nation for over two weeks, was now "under total control."

Brent crude, which had climbed to $63.89 per barrel earlier in the session—its highest level since mid-December—slipped back toward $63.12 by the afternoon. West Texas Intermediate followed a similar pattern, pulling back from a session high of $59.65 to trade near $58.84.

The Iran Factor

Iran exports nearly 2 million barrels per day and ranks as OPEC's fourth-largest producer, making any significant disruption to its output a major concern for global markets. The protests, which began in late December, had spread to multiple cities and reportedly resulted in hundreds of deaths, raising the specter of regime instability in one of the world's most important oil-producing nations.

The government's claim of restored order—while difficult to independently verify given restrictions on foreign journalists—was enough to take some of the geopolitical risk premium out of oil prices. But analysts cautioned that the situation remains fluid.

"Markets are taking the Iranian government's word for it today, but the underlying discontent that sparked these protests hasn't gone away," said one energy analyst at a major investment bank. "We could see prices snap back quickly if violence resurges."

Venezuela Adds to Uncertainty

While Iran dominated headlines, uncertainty over Venezuela's crude shipments continued to cloud the global supply picture. The Trump administration has sent mixed signals about whether to maintain, tighten, or relax sanctions on Venezuelan oil exports following the dramatic capture of former President Nicolás Maduro earlier this month.

President Trump warned Cuba over the weekend that Venezuelan oil and financial support would be cut off unless Cuban leaders reach a deal with Washington, adding another layer of geopolitical complexity to energy markets.

The Bigger Picture: Oversupply Looms

Despite the day-to-day geopolitical volatility, the fundamental picture for oil remains bearish. The U.S. Energy Information Administration projects that global oil inventories will continue to rise through 2026, putting sustained downward pressure on prices.

The agency forecasts Brent crude will average just $55 per barrel in the first quarter of 2026 and remain near that level for the rest of the year. U.S. oil prices are expected to average $51 a barrel for the full year, down from $65 in 2025 and $77 in 2024.

"We're in a structural oversupply environment. Geopolitical flare-ups can create short-term price spikes, but the gravitational pull of excess supply will keep reasserting itself."

— EIA Short-Term Energy Outlook

Winners and Losers

The oil price retreat created clear winners and losers across the energy sector Monday:

  • Airlines: Carrier stocks got a modest boost as fuel cost concerns eased slightly. Delta Air Lines, which reports earnings Tuesday, was among the beneficiaries.
  • Refiners: U.S. refiners, which benefit from lower crude input costs, saw positive sentiment.
  • Oil Services: Companies like Schlumberger (SLB) that depend on robust drilling activity face continued pressure as lower prices reduce the incentive for producers to expand.
  • E&P Companies: Exploration and production firms face margin pressure if prices remain subdued, though those with significant gas exposure may fare better.

Natural Gas: A Different Story

While oil struggles with oversupply, natural gas markets tell a different story. Demand for the cleaner-burning fuel is growing due to the construction of new LNG export terminals and, increasingly, AI data centers that require massive amounts of electricity.

Analysts expect natural gas to significantly outperform oil in 2026, making gas-weighted producers more attractive for investors seeking energy exposure.

What to Watch

For the week ahead, energy traders will be monitoring:

  • Any signs that Iranian protests are resurging despite government claims
  • U.S. policy clarifications on Venezuela sanctions
  • Wednesday's EIA inventory report for clues about domestic supply trends
  • OPEC+ compliance with agreed production cuts

The Investment Case

For investors, the energy sector presents a challenging risk-reward calculation. On one hand, geopolitical risks could spike prices at any moment. On the other, the structural oversupply suggests limited upside even if disruptions occur.

UBS has maintained Magnolia Oil & Gas as a top pick for 2026, noting that companies with strong balance sheets and disciplined capital allocation can thrive even in a challenging price environment. The key is finding operators that can generate cash flow at lower price points rather than betting on a return to higher prices that may not materialize.

For consumers, the outlook is decidedly positive: 2026 is shaping up to be the cheapest year for gasoline since the COVID-19 pandemic, providing a meaningful boost to household budgets at a time when inflation in other categories remains sticky.