Commodity markets are back on fire today as yesterday's temporary euphoria completely shattered. Anyone who thought the US-Iran conflict would end quickly had to bite their fingers again after crude oil prices surged again today, thus reviving the geopolitical risk premium.
The market atmosphere is now shrouded in anxious and doubtful emotions, the Dollar's downward momentum is starting to stall while oil (WTI) traders are starting to prepare positions, ready to ride the wave of panic if the situation in the Middle East worsens again.
Key Drivers & Market Signals
Doha Peace Talks Hit a Dead End, New US Attacks Rekindle Market Sentiment
What is actually happening in the market is a brutal reality check. High hopes of seeing a quick peace deal in Doha are starting to fade as both sides are reportedly unable to find an immediate solution.
The atmosphere became increasingly tense when the US military reportedly launched a new attack on southern Iran early this morning, targeting a minelaying vessel and a missile launch site.
This event is very important to the market because it proves that the war is not over, thus extinguishing the remnants of yesterday's optimism. As a result, the geopolitical risk premium skyrocketed again, pushing WTI to bounce back from the $92.25 price level, thus making traders start betting that energy inflation will remain high.
Strait of Hormuz Remains the 'Lifeline' of the Global Economy
Another factor that locks the focus of traders is the puzzle of reopening the Strait of Hormuz. Although there are talks to open this key maritime corridor 30 days after the agreement is signed, there is no firm date guarantee so far.
This situation is very critical to the market because the Strait of Hormuz is the main artery for the world's crude oil and LNG shipments. Failure or delay in reopening this route perpetuates fears of a global supply shock.
This market signal directly forces analysts to reassess Fed policy expectations, if oil prices remain high, world inflation will continue to rise, and this will handcuff New Fed Chairman Kevin Warsh from cutting interest rates this year.
Market Technical Analysis
Based on the monthly chart structure, the price movement of WTI crude oil is determining the fate of the direction of the US Dollar and gold.
Current Bias: Short-Term Bullish (Within the large consolidation range of $80 – $120).
Support Price Level ($87,620): WTI's daily bounce is due to buyers defending the $87,620 level very aggressively. This price level is very important because it is the Resistance Become Support (RBS) of 2022 and 2023. As long as this price level is not broken, the oil market will have strong price support to continue climbing.
Key Resistance Price Levels ($107,387 & $123,819): WTI needs to break the trend line at $107,387 to confirm the upward momentum. If this price level is successfully broken, it will open the way to the resistance level at $123,819. If it happens, it will trigger a global hyperinflation chain.
Market Focus
Doha Talks Developments & Fed Statement: The market is currently 100% driven by geopolitical headlines. Any developments from Doha or reports of new airstrikes will move oil prices drastically. Market players are also waiting to see if the FOMC will issue a fresh hawkish statement in the wake of this resurgence in energy prices.
