WTI crude is pulling back despite the weekend's news - is further upside limited?
Crude oil closed 0.05% lower on Friday, as investors remained cautious ahead of the weekend and potential developments in the Israel-Iran conflict. News of U.S. involvement led to a sharply higher open in crude oil, but the market pulled back after reaching a high of $77.13 - just below the previous Friday’s peak. Overall, the market continues to extend its relatively volatile consolidation.
For oil markets specifically, these developments are worth monitoring:
- U.S. President Trump claimed to have "obliterated" Iran’s main nuclear sites over the weekend, escalating tensions alongside Israeli strikes. Iran responded by threatening broader retaliation and labeled Trump a "gambler."
- Iran, OPEC’s third-largest oil producer, warned that the U.S. attacks expanded the scope of legitimate military targets. Tehran signaled it may retaliate against broader U.S. interests.
- Fears persist that Iran could retaliate by closing the Strait of Hormuz, a crucial shipping lane for 20% of the world’s crude oil. Analysts say any disruption here could severely impact global supply.
- Analysts note that Iran depends heavily on the Strait for its own oil exports, making full closure risky for its economy. Sugandha Sachdeva of SS WealthStreet called such a move a "double-edged sword."
Conclusion
Crude oil opened significantly higher after the weekend, but is now trading just 0.2% higher, as sentiment has improved despite U.S. involvement in the Middle East conflict. While the market may be forming a top, no clear bearish signals are evident at this time.
For now, my short-term outlook is neutral.
Here’s the breakdown:
- Crude oil prices pulled back after opening higher following the weekend.
- The ongoing tariff-related volatility, combined with economic data, is adding to market uncertainty.
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Thank you.
Paul Rejczak,
Stock Trading Strategist
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