• Crude Oil futures continue to recapture the gains lost from a rather short-lived pullback since this past Friday’s 12% spike, as tensions between Israel and Iran remain heightened and signs of de-escalatory negotiations are deemed non-conclusive and are running thin, as the conflict enters its 7^th day.
• Intensity of the strikes from both sides somewhat softened halfway through the week, yet earlier today, Thursday, agencies broadcasted that Israeli warplanes have conducted successful strikes on nuclear facilities across Iran, including Natanz and the Arak (Khondab) heavy-water nuclear reactor that is capable of enriching plutonium, and Iranian ballistic missiles landed near a hospital in Beersheba, injuring 270 people. Mass evacuations from Tehran are also well underway after threats of targeting.
• Furthermore, Israel has announced that it has achieved complete air superiority over Iranian airspace and warplanes are flying relatively uninterrupted, without much resistance. The IDF believes that it has already destroyed two thirds of Iranian missile launchers and now Israel has requested the aid of US bombers to devastate further Iran’s nuclear and military facilities.
• A nuclear compound dug 100m down inside in a mountain in Fordow, is the most critical target in the eyes of Israelis and with the help of US bombers, a successful strike would sever Iran’s capabilities at enriching uranium for military purposes and force Tehran to come back to the negotiating table, but with vastly different requests.
• Israel’s objectives according to PM Netanyahu are to remove all nuclear and ballistic threats of Iran, but also create the necessary conditions that will lead to the downfall of the current regime.
• Coup d’état speculations have also started to echo across media, with the son the last monarch of Persia, Shah Reza Pahlavi II, making online campaign appearances, calling Iranians to revolt against the regime of the Supreme leader, Ayatollah Khamenei and instead, under so called democratic conditions, instate him as the next ruler of Iran.
• Markets now await for the response of the United States, whether they will join Israeli forces and launch a full-frontal attack on Iran, or whether Trump’s America will adopt a more covert and supportive role in aiding Israel achieving its objectives.
• Needless to say, the prospects for a full-fledged war in the Middle East remain materially elevated and run the risk of plunging the entire region into warzone yet again.
• Full out conflict in the Persian Gulf and more specifically in the Strait of Hormuz, could severely destabilize and outright disrupt the supply chain and logistic capabilities of the entire region, from which almost one third of global oil is flowing out of.
• Oil Reports indicated that Saudi Arabia is briefing allies and industry experts to say the kingdom is unwilling to shore up the market with further output cuts and can endure a prolonged period of lower prices. If such scenario comes in play, crude prices may venture lower, heading into territory last seen before in January of 2021.

Technical Analysis of Oil

WTI Chart – Negative momentum drives WTI prices closer to fresh 4 year lows

• Resistance:  77.60 (R1), 80.70 (R2), 85.00 (R3)
• Support: 72.50 (S1), 68.50 (S2), 64.50 (S3)

WTI futures managed to swiftly recover most of the short-lived pullback losses, rebounding strongly towards last Friday’s $77.60 peak as traders project that the prolongment of the conflict between Israel and Iran could disrupt global supply flows of the commodity.

We continue to hold a bullish bias for the commodity, given the traders’ revamped interest and supporting our case is the RSI indicator which currently registers a value of 71, remaining close to overbought levels, the spiked-up ADX value of 80, signalling extreme strength of momentum, in tandem with the absence of selling pressure as indicated by the plummeted -DI. Furthermore, the fact that price action has detached from both the 12 and 26 EMA lines also highlights the overextension of the move and the overpowering force of the bulls.

Should the bulls maintain control, we may see the commodity retesting the $77.60 (R1) resistance level and after a successful break and head on to challenge the $80.70 (R2) peak, last seen on 16^th of January of 2025. Should the bears take over with strong momentum on their side, we would reasonably expect to see a break below, the closest line of defence for the bulls, around the $72.50 (S1) support level, and head south, towards the $68.50 (S2) support zone.