Oil prices: TD Securities flags persistent conflict-driven baseline and higher premiums

TD Securities says oil prices face a structural shift: a conflict-driven baseline is now embedded in market pricing. Geopolitical risk is increasingly treated as a persistent premium over traditional supply-demand fundamentals, keeping volatility elevated even when day-to-day conditions look calm. Middle East tensions could threaten shipping chokepoints. Eastern Europe conflicts may disrupt supply routes, while political instability in Africa can affect production forecasts. TD Securities estimates these risk components could add roughly $8–$15 per barrel to current oil prices—compared with the pre-2020 world, when conflict premiums were usually temporary. For trading, oil prices are increasingly driven by geopolitics, which can weaken the usefulness of traditional hedges. War-risk insurance and evolving sanctions regimes add uncertainty, and logistics/insurance costs must be monitored continuously. Watch indicators tied to shipping traffic through chokepoints, energy infrastructure incidents, diplomatic engagement, war-risk insurance premium shifts, and strategic petroleum reserve deployment. If de-escalation occurs, the premium may fade gradually. If conflicts expand, the oil prices floor could rise further—supporting a higher volatility regime that can spill into broader risk assets, including crypto via macro sentiment and liquidity.