Why Oil Bears May Make a Stand as Prices Approach Highs

Oil Prices Surge in 2026

So far in 2026, global markets have been shaped by a 1970s-esque energy shock that has sent the United States Oil Fund ETF (USO) up a blistering 134.72% year to date. Of course, the main culprit behind the move is the ongoing and heightened conflict between the United States, Iran, and surrounding Middle Eastern countries. Initially, the Trump Administration signaled that the conflict would be a quick military operation in which Iran’s nuclear arsenal would be destroyed. Nevertheless, the U.S. has continued to conduct military operations.

However, despite inferior resources and extreme economic sanctions, the Iranian military has proven to be a far more formidable adversary than the Trump Administration anticipated. Instead of fighting toe to toe, Iran has used drones and surprise attacks to interfere with the Strait of Hormuz and other critical energy infrastructure, driving global energy prices. What was supposed to take a few weeks has dragged on for nearly seven months. That said, oil is finally at a level where the bear case may have some merit. Below are three reasons why:

Crude Oil Follows Seasonal Playbook

In 2026, oil prices have closely followed historical seasonality trends. Typically, oil prices ramp from the end of the first quarter to late June or early July, when they top for the year. So far, oil prices have done exactly that, although September has been stronger than normal. That said, over the past 20 years, October and November are negative months on average for crude oil.

Crude Oil Approaches Key Confluence Zone

In technical analysis, the more significant indicators that line up, the higher the probability of the outcome. Crude oil futures have reached the 0.786% Fibonacci target (using the March high and the July lows). Typically, the 0.786% level is where bulls lock in gains. In addition, crude is approaching a large supply zone from early 2026, where it stalled on three occasions.

Is All the Best Oil News Priced-In?

Historically, stocks and commodities bottom when the headlines appear the bleakest and top when the news feels like it can’t get more positive. For example, Bitcoin bottomed in 2022 when Sam Bankman Fried, the former CEO of the FTX crypto exchange, was arrested.

Conversely, earlier this year, AI leader Micron (MU) topped the session after delivering record earnings and raising its forward guidance.

Currently, with daily military escalations and oil disruptions, it’s hard to envision a more bullish news environment for crude oil prices. Meanwhile, there are signs of irrational exuberance in oil-adjacent ETFS. For example, the Breakwave Tanker Shipping ETF (BWET), which tracks the cost of transporting crude oil by sea, is up an unbelievable 5,000% over the past year.

Bottom Line

Oil prices have surged thus far in 2026 - however, the technical chart and historical seasonality point to a market that could stall into year-end.

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This article originally published on Zacks Investment Research (zacks.com).

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