Trump Deadline Looms

Oil prices continue to push higher on Tuesday as Trump stokes heightened uncertainty over the war in Iran. Speaking overnight, Trump vowed to destroy Iran unless it reopens the Strait of Hormuz today. Iran, in turn, has promised widespread retaliation if Trump escalate attacks on Iran with Israel. As such, there is heavy risk of significant supply disruption near-term if Iran refuses to meet Trump’s demands and the US and Israel press ahead with heavier attacks on Iranian infrastructure. Against this backdrop, crude prices should stay elevated near-term with risks of a fresh push higher if Trump does escalate the war against Iran.

Big Volatility Risks

The situation remains very hard to call given the unpredictable nature of Trump’s policy strategy. On the one hand, this could be simply another threat to try and force Iran’s hand, with the deadline merely pushed back again if Iran doesn’t agree at this stage. If we hear any news of the deadline being extended, or any glimmer of hope that a deal can be done, oil prices should reverse lower near-term. Indeed, if we get a major breakthrough and Iran agrees to meet Trump’s terms, this should see oil prices falling sharply. As such, there is plenty of volatility risk for traders to be wary of around incoming news flow near-term.

Technical Views

Crude

The rally in crude has seen the market breaking out firmly above the 101.69 level with price now testing the 114.44 resistance just ahead of the YTD highs. 123 sits above as the next resistance to note with the long-term bear trend line coming in around that level also. Any break of that area could signal a longer-term shift in oil prices higher.