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This is a follow up article on: Oil Prices Consolidate on Mixed Market Signals
Oil markets opened the week with prices edging higher as concerns grew over potential supply disruptions from the Middle East after Israel intensified its attacks on Iranian-backed forces.
Brent crude oil (Symbol: UKOUSD) rose as high as to $73.392 per barrel, while U.S. West Texas Intermediate (WTI) (Symbol: USOUSD) traded strongly at $70.004 per barrel as of early Monday trading.
Picture: Oil prices rise as Israel escalates attacks on Iranian-backed forces, as observed on the VT Markets app.
Looking on Brent’s performance in the charts, the US crude price closed at 69.446, showing an attempt to recover after last week’s declines. The price briefly tested the key resistance level of 70.00 but failed to sustain momentum, pulling back to current levels.
This has come after a notable drop in Brent and WTI prices, which fell by around 3% and 5%, respectively, due to concerns over weakening demand in China last week.
The MACD indicator reveals a shift in momentum, with the histogram turning positive and the MACD line crossing above the signal line, signaling a potential short-term uptrend. However, the moving averages (24, 24, 72-period EMA) show that the price is still hovering near key resistance, and any failure to break above 70 could see renewed selling pressure.
Market participants are closely watching for any signals from China, where stimulus efforts have yet to translate into a confidence boost, leaving concerns about the global oil consumption outlook in play.
If prices fail to break above 70, we may see further downside with support near 68.10, while a sustained breakout could target higher levels in the coming sessions.
Market participants are now paying close attention to the growing risks of supply disruptions as Israel escalates its confrontations with Iranian-backed forces, including Hezbollah in Lebanon and the Houthi rebels in Yemen.
These militant groups have ties to Iran, a key OPEC producer. Further contributing to the geopolitical tension, Israel has expanded its operations, bombing Houthi targets in Yemen and killing Hezbollah leader Hassan Nasrallah in Lebanon.
In response, the U.S. is increasing its military presence in the region, preparing to defend its personnel and interests against potential threats from Iran or its allies.
In the near term, traders are expected to closely monitor the Middle East situation, as any further escalation could lead to volatile price swings. While geopolitical risks favour bullish sentiment, especially with Iran potentially entering the conflict, concerns about global demand remain a counterbalance.
Additionally, Federal Reserve guidance on interest rates will play a critical role in shaping market direction this week. For now, traders may expect choppy sessions, with the potential for gains if conflict intensifies or if the Fed signals larger-than-expected rate cuts.
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