Oil markets extended modest gains on Tuesday, with Brent crude and U.S. West Texas Intermediate futures nudging higher as investors weighed the prospect of Russian supply disruption against the implications of an imminent U.S. Federal Reserve decision. Brent traded around $93.80 a barrel, up roughly 0.7% from the previous close, while U.S. crude quoted near $90.10, about 0.6% higher as participants trimmed short positions and re-priced geopolitical risk into benchmarks.

The near-term upward pressure followed a string of Ukrainian drone attacks on Russian refinery infrastructure, which market participants said could curtail fuel-processing capacity and raise premiums on refined products such as diesel and gasoline. Russia remains a major oil exporter and a key supplier of refined fuels to nearby markets; any sustained drop in its refining throughput would tighten regional product balances and could be felt across European and Asian wholesale markets.

At the same time, traders were focused on the Federal Reserve’s upcoming policy decision and the bank’s outlook for growth and rates in 2026 and 2027. “If the Fed lowers its GDP growth forecasts for 2026 and 2027 and the projected Fed Funds rate for 2026 is lowered to 2% in line with current market pricing, that implies a weaker demand environment in the U.S. which could weigh on oil,” said Wong, reflecting the dominant market narrative that monetary policy expectations now carry as much weight as geopolitics in determining oil direction.

The interaction between monetary policy and oil is twofold. Lower-for-longer interest-rate expectations tend to weaken the dollar, which can make dollar-denominated commodities like oil cheaper for holders of other currencies and thus supportive of prices. Conversely, a downgraded growth outlook for the United States—the world’s largest single-country oil consumer accounting for roughly one-fifth of global demand—would likely temper consumption and weigh on crude prices over time.

Market strategists noted that the current move is small relative to past shocks, signaling that traders are treating the events as conditional risks rather than structural breaks. Volatility measures across energy futures remain elevated compared with year-earlier levels, reflecting persistent uncertainty from geopolitical flashpoints and uneven global demand trends. Inventory data and refinery runs in the coming weeks will be watched closely for evidence that the Russian strikes have meaningfully reduced output or that consumers are responding to changing economic signals.

For policymakers, the episode underscores the delicate balance between geopolitics and macroeconomic policy. Central banks’ communications now influence commodity markets as directly as pipeline disruptions once did, complicating efforts to judge inflationary pressures and the timing of future rate moves. Over the longer term, recurrent disruptions to supply chains and refining capacity could accelerate investments in diversification, storage and renewables, but in the near term traders are bracing for continued tug-of-war between a possible supply shock in Russia and any Fed messaging that points to a weaker demand backdrop.