-By Dr Sara Vakhshouri*

In an April 2024 piece for the Atlantic Council, I noted how dominant narratives were distorting global energy security. Nearly a year later, it was encouraging to hear IEA Executive Director Fatih Birol echo similar concerns. Speaking at the 24 March launch of the IEA’s 2025 Global Energy Review, Mr Birol encouraged the market to “stick to data” and warned to avoid “narratives driven by different motivations.” It’s a constructive appeal for analytical rigor but it also invites a broader, more nuanced conversation. In many cases, data is the narrative, and the distinction between the two is not always as clear-cut as it may seem.

Facts are raw observations, but once we begin selecting, organizing, and modeling those facts, we apply interpretive frameworks intentionally or not. The resulting data reflects those assumptions. In this sense, data is shaped by methodology and context, and while not inherently biased, it is rarely entirely neutral. As such, data can carry narrative weight depending on how it is constructed, framed, and communicated.

Projections and forecasts take this further. They embed expectations about future developments policy, behavior, technological shifts, and macroeconomic risks. Every forecast reflects a lens, shaped by methodology, institutional context, and strategic priorities.

Understanding how narratives shape market expectations is essential. Though often based on data, they influence pricing, investment, and energy strategy. Decision-makers must look beyond the numbers to the assumptions.

A clear example is the methodological difference between IEA and Opec projections. Both institutions rely on data-driven models, yet they apply distinct frameworks that reflect different perspectives on how the future may unfold. The IEA incorporates assumptions about the future impact of policy commitments particularly related to climate and regulatory pathways while Opec’s models rely more heavily on classical economic forecasting models and focusing closely on supply-demand dynamics. Both approaches are data-driven, yet they reflect different frameworks and, therefore, different narratives.

BEYOND THE NARRATIVE: UNDERSTANDING MARKET SENTIMENT

Overlaying all of this is market sentiment—a powerful but often underappreciated force. Sentiment isn’t data, and it’s not a forecast, nor is it easily measured by traditional analytical tools. It’s the collective mood or conviction that drives how markets respond to a given narrative at a particular moment. In many cases, it reflects the story the market chooses to believe.

A telling example emerged last year: despite intensifying geopolitical risk in major oil-producing regions, oil prices remained relatively subdued. This wasn’t due to a lack of concern about supply it was that sentiment had shifted toward skepticism about China’s economic growth and global demand softness. Supply risks didn’t disappear; they were simply overshadowed by a more dominant bearish narrative. In moments like these, sentiment often outweighs fundamentals especially in periods of heightened uncertainty.

NARRATIVE AMPLIFICATION IN THE AGE OF ALGORITHMIC TRADING

This becomes even more complex in the age of algorithmic trading, where automated systems especially those using natural language processing (NLP) ingest and react to vast streams of information in real time, from fundamentals to technical indicators to media headlines. While these systems are designed to account for multiple variables, they are often highly sensitive to whichever narrative dominates the media and public discourse at a given moment. A surge in attention around a particular theme such as weakening demand in China or escalating tensions in the Middle East can trigger immediate positioning shifts, even when underlying fundamentals remain largely unchanged. For example, a Financial Times article titled “Saudi Arabia to Drop $100 Crude Target to Win Back Market Share” from 2024 citing unverified sources, led to a 1.7% drop in Brent prices showing how quickly markets react to media headlines without confirmation.

This creates a feedback loop: dominant narratives drive media coverage, media coverage influences algorithms, and algorithmic trades reinforce the narrative through market movement. The result is amplified volatility, where perception not fact can become the main price driver, at least in the short term.

STEP ZERO: WHEN FACTS ARE UNCLEAR & REALITIES DISPUTED

Today, the oil market is grappling with more than diverging projections or competing narratives it’s facing uncertainty in the facts themselves and the breakdown of a shared baseline of facts. Rapid, often contradictory policy shifts especially from major economies like the US blur the line between strategic intent and tactical messaging. As a result, the market responds not just to fundamentals, but to headlines, signals, and perceived intent.

Between policy and perception, a tactical spectrum of oil market volatility has emerged. The current US posture reflects a dual-track strategy mixing punishment with high-stakes incentives from the threat of military pressure on Iran and tariffs on Russian oil buyers, to possible negotiated deals, aiming to shape outcomes through both punishment and engagement.

These opposing forces pull the market in different directions. Tariffs whether used as a sanction tool or trade policy can drive inflation and suppress demand, while geopolitical risks elevate supply concerns and risk premiums.

In this fog of ambiguity, where facts, data, narratives, and the assumptions behind them are often misaligned, we find ourselves navigating a market shaped as much by perception as by reality. In such an environment, careful discernment of all these factors becomes not just important, but essential.

*Dr Sara Vakhshouri is Founder and President of SVB Energy International; Founding Chair, IWP Center for Energy Security and Diplomacy; Adjunct Professor, Georgetown University School of Foreign Service, and Senior Fellow at Oxford Institute for Energy Studies (OIES).