Trump’s second term triggers oil price surge amidst market uncertainty

Oil prices climbed as the market prepared for a period of heightened uncertainty and potential disruptions with the inauguration of U.S. President-elect Donald Trump for his second term, according to Bloomberg.

Brent crude traded above $81 per barrel after two consecutive sessions of losses, while West Texas Intermediate (WTI) neared $78 per barrel. These gains reflect market anticipation of Trump’s policy shifts and potential geopolitical tensions.

Trump’s agenda

Trump has announced plans for a series of executive orders on his first day in office, focusing heavily on energy policy. He has also threatened to impose steep tariffs on China, Canada, and Mexico and hinted at reintroducing harsh sanctions on Iran.

Oil prices have been on an upward trend since the start of the year, spurred by severe cold weather in the Northern Hemisphere, which boosted demand for heating fuel. Additionally, expanded U.S. sanctions on Russia’s oil industry have left Asian markets scrambling for alternative supplies. Monday’s trading volumes, however, could remain subdued due to a U.S. federal holiday.

Recent sanctions on Russia have disrupted tanker flows, driving up Middle Eastern crude prices and creating a bullish backwardation in Brent’s market structure. Speculators have increased their long positions, even as short positions build up.

Scott Besant, Trump’s Treasury Secretary nominee, has expressed support for further sanctions on Russia’s oil sector, signaling more market instability ahead. Trump’s National Security Advisor nominee has also pledged to renew the "maximum pressure" campaign on Iran, further escalating tensions.

Ceasefire in Gaza

On a separate note, a ceasefire in Gaza brokered by Qatar and Egypt, with U.S. support, has temporarily halted hostilities. Under the agreement, Hamas will release 33 hostages in exchange for Israel freeing hundreds of Palestinian detainees during a six-week truce.

As Trump’s policies take shape, markets remain poised for potential upheavals, making adaptability key in navigating the shifting geopolitical landscape.