Geopolitical oil price shocks: Why these shocks hit harder in Oil & Companies News 01/05/2026 When geopolitical crises strike, oil prices often surge, with consequences that extend far beyond energy markets. This column shows that oil price shocks associated with geopolitical tensions differ markedly from those observed under normal conditions. They generate sharper price increases relative to production declines, trigger a distinctive inventory cycle driven by precautionary behaviour, and lead to persistent macroeconomic contractions. Importantly, these shocks produce no clear winners: both oil-importing and oil-exporting economies experience output losses and rising inflation, with the effects particularly severe in countries lacking domestic energy buffers. The relationship between geopolitical tensions and energy markets remains central to policy discussions. Russia’s invasion of Ukraine in February 2022, for example, pushed Brent crude prices above $100 per barrel for the first time since 2014. More recently, tensions in the Middle East have renewed concerns about potential disruptions to oil shipments through the Strait of Hormuz, a critical chokepoint for global energy trade. These episodes are part of a broader historical pattern in which geopolitical events generate substantial oil price volatility. The 1990–1991 Gulf War, the Libyan civil war in 2011, and the 2019 attacks on Saudi Aramco facilities all led to pronounced movements in oil prices. An important body of research has examined the macroeconomic consequences of oil price fluctuations (Caldara and Iacoviello 2019, Baumeister and Hamilton 2019, Kilian and Murphy 2012, 2014, Kilian 2009). Recent contributions provide comprehensive analyses on the relationship between geopolitical developments and oil price fluctuations (Baumeister and Hamilton 2023, Baumeister 2023, Bondarenko et al. 2024, Kilian et al 2024). Pinchetti (2024) recently highlighted that oil price dynamics during periods of heightened geopolitical risk differ meaningfully from those arising in calmer times, motivating sharper identification strategies. A key question remains insufficiently understood: do oil price fluctuations triggered by, or occurring around, periods of heightened geopolitical tensions behave differently from other oil price shocks, both within the oil market and in their broader macroeconomic effects? This question is central for governments, central banks, and international institutions, which must repeatedly assess how severe, persistent, and economically damaging oil price spikes driven by geopolitical events are likely to be. In our paper (Verduzco-Bustos and Zanetti 2026), we disentangle the fluctuations of oil prices around periods of heightened geopolitical risk and use it to study its systematic impact on the global oil market, key US macroeconomic aggregates, and cross-border spillover effects on other commodity markets, output, and inflation. We show that oil price movements associated with geopolitical risk have distinct dynamics and macroeconomic consequences, driven in part by forward-looking behaviour and heightened uncertainty. A new instrument for geopolitical oil price shocks Our identification strategy is based on the observation that oil prices respond almost immediately to geopolitical news, often before any physical disruption in supply occurs. To capture this effect, we combine high-frequency data on geopolitical risk with movements in oil future prices. Specificall