Oil jumps on reports of possible US strikes against Iran

FUNDAMENTAL OVERVIEW

The price of crude oil is climbing once more as the possibility of fresh US military strikes on Iran grows. According to reports, the White House requested that the Pentagon draw up plans for hitting Iranian targets, possibly ahead of the US midterm elections. This has sparked worries that the current phase of relative calm might be ending.

Additionally, the Pentagon is said to have directed CENTCOM to finalise readiness for possibly restarting large-scale combat operations. Although no definitive choice has been taken, the prospect of attacks on Iranian facilities, together with the chance of reprisals against American or Gulf assets, is leading traders to factor in a greater likelihood of supply interruptions.

Even if there is no actual halt to output or deliveries, market participants are already considering the scenario that a rise in tensions could endanger Gulf energy facilities or transit via the Strait of Hormuz.

For markets, the main uncertainty is what comes next. A reduction in tensions could swiftly erase some of the risk premium and send crude prices down, whereas an extended standoff or outright armed conflict could sustain the premium and possibly push oil much higher.

CRUDE OIL TECHNICAL ANALYSIS – DAILY TIMEFRAME

Crude oil rebounded from the lower bound of the channel and extended gains as buyers piled in to position for a rally to the 110.00 resistance. If another pullback to the bottom trendline occurs, buyers are expected to step in again, with a defined risk below the channel, continuing to target the 110.00 resistance. Sellers, conversely, will look for a break lower to pile in for a drop to the 68.00 support next, with the 80.00 level as the first target.

CRUDE OIL TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME

The price broke above the downward trendline and momentum accelerated as buyers raised their bullish bets towards the 96.77 level. If the price reaches that point, sellers are expected to step in, with a defined risk above the level, to position for a drop back to the lower bound of the channel. Buyers, on the other hand, will look for a break higher to increase bullish bets towards the 110.00 resistance.

CRUDE OIL TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME

A minor upward trendline defines the current momentum and could serve as support during a pullback. Buyers will likely rely on the trendline, with a defined risk below it, to continue pushing to new highs, while sellers will look for a break to begin positioning for a drop below the lower bound of the channel.

UPCOMING CATALYSTS

The latest US weekly jobless claims data is due today. Tomorrow, the week concludes with the University of Michigan consumer sentiment survey. However, attention stays on events in the Middle East.