Outlook
Oil prices remain under up‑side pressure from geopolitical tensions and supply risk, with Brent trading at elevated levels and volatility unlikely to fade quickly. A pause in OPEC+ production increases provides some near‑term discipline, but escalation around Iran or Venezuela, or further sanctions on Russia, could keep Brent bid and oil‑tied currencies supported. For the OIL currencies, CAD, NOK and RUB tend to move with oil; a sustained oil rally supports them, while a sharper pullback or a strong USD can limit gains.
Key drivers
- Geopolitical tensions in Iran and Venezuela have helped lift Brent, underscoring the link between supply risk and the oil complex ( Brent surged in January 2026, closing near $70.69/bbl).
- Potential U.S. military action against Iran remains a risk factor for oil, with Brent hitting four‑month highs on the escalation narrative (Jan 29, 2026).
- U.S. sanctions on Russian oil firms have disrupted supply chains, highlighted by Lukoil declaring force majeure at an Iraqi field (force majeure means a contractual obligation may be suspended due to unforeseen events).
- OPEC+ decisions to pause further production increases in Q1 2026 aim to manage a global oversupply while demand moderates.
- The currencies most tied to oil—CAD, NOK and RUB—remain sensitive to moves in oil, given their economies’ exposure to oil exports.
Range
- OIL to USD at 67.75 is 6.1% above its 3‑month average of 63.83, having traded in a very volatile 19.0% range from 59.04 to 70.26.
- OIL to EUR at 57.09 is 4.9% above its 3‑month average of 54.44, having traded in a very volatile 17.8% range from 50.26 to 59.19.
- OIL to GBP at 49.64 is 4.6% above its 3‑month average of 47.47, having traded in a very volatile 17.3% range from 43.98 to 51.58.
- OIL to JPY at 10357 is 4.0% above its 3‑month average of 9961, having traded in a very volatile 18.4% range from 9139 to 10818.
What could change it
- Further escalation of geopolitical risk or expanded sanctions could push Brent higher and lift oil‑linked currencies toward new highs.
- A material easing of tensions, or an uptick in OPEC+ supply, could weigh on Brent and compress the ranges for OIL currencies.
- A stronger USD or a shift in global risk sentiment could dampen oil gains and cap CAD, NOK and RUB strength even if oil stays firm.
- A notable shift in demand outlook (for example, improved global growth or a weaker demand signal) could alter the oil‑currency dynamics and move OIL pairs toward the lower end of recent ranges.
