The technical chart is definitely looking ominous now as a firm break above $90 could easily light up the path towards $100 next. With the US continuing to launch strikes at Iran, we’re also seeing Iran step up attacks across the region and not just at US bases in the Gulf. The sporadic and spread out nature of Iran’s attacks mean that nothing is really safe in the region and they are also still keeping the Strait of Hormuz in de facto closure.
To make matters worse now, there is the potential for shipping disruptions in the Red Sea too. That as the Houthis are now teaming up with Iran to stifle Saudi vessels that are looking to transit to/from the Jeddah port. Troubling times.
[WTI crude oil daily chart ($/bbl)]
This is all leading to higher oil prices with WTI crude now threatening a firmer break above the $90 mark. This is the first time since 11 June that futures have come up to hit the figure level.
And from the chart above, there is much to be mindful about from the technical side of things.
For one, oil buyers are now threatening of the key trendline resistance set out by the peak in prices during April and May. But adding to that, we’re also seeing price now start to break above the 100-day moving average (red line). If sustained, that will shift the momentum back to being more bullish for oil prices and underpin the push higher we’re seeing this week.
And with the Middle East situation set to persist for longer, market fears are being exacerbated right now and that could easily lead to another similar run that we saw back in March.
At some point, you would expect the US to try and make nice again. However, I reckon that won’t happen until Trump is feeling the heat of oil prices being too high and stocks being hammered lower. What is happening now is basically a testament to the fact that the market moves in May and June bought him enough of a buffer to escalate the conflict with Iran again.
And it’s not entirely his fault though as we all know what Iran’s goal was and how they wanted to keep kicking the can down the road. It was always on the cards. The only question was whether Trump would be goaded into breaking the facade and stop the play acting from both sides.
Well, I guess we have the answer to that from the past few weeks. And now, the question turns back to will the US concede to make another attempt at peace with oil prices surging higher and stocks falling back down? It feels like a question of when and not if perhaps.
This article was written by Justin Low at investinglive.com.