Ceasefire Fears Driving Crude

Crude prices are on watch this week as fresh tensions around the Strait of Hormuz and ceasefire uncertainty drive renewed volatility in energy prices. Crude spikes higher yesterday in response to news that US ships had been struck by Iran in the area, along with Iranian missile attacks on UAE sites. In response, the US has targeted Iranian fast boats in the Strait along with harsh words from Trump who warned that Iran will be obliterated if any further attacks occur. With the ceasefire in grave danger of collapsing, risks of a fresh push higher in oil are center stage today. Despite, this, crude prices have actually been softer through the European morning, perhaps showing some relief that both sides have refrained from any further escalation.

US Forcing The Strait Open?

Another factor potentially helping ease oil prices lower is the news that the US is effectively trying to force open the Strait of Hormuz. Trump announced this week that US ships passing through the Strait would be defended by US military and has warned Iran not to take any action against them or risk severe consequences. However, it is not yet clear the extent to which any ships will choose to risk passing through the Strait which would limit the impact on supply. Near-term, crude prices look vulnerable to a continuation higher unless wee see a breakthrough in the peace process or some compromise on the Strait from Iran.

Technical Views

Crude

For now, crude prices remain stalled around the 101.69 level, still within the contracting triangle pattern which has framed the consolidation from YTD highs. While within the channel, focus is on an eventual break higher with 114.44 the local resistance to note ahead of the higher 123. Level. To the downside, 95.06 is first support ahead of 84.60 and the triangle lows.