Oil Prices Subdued Despite Iran’s Attack on Israel

  • USOil
    (${instrument.percentChange}%)

USOIL Analysis

Iran launched a military strike against Israel over the weekend, as a response to the hit to its Embassy in Damascus at the start of the month [1]. The Israeli government spoke of a "large-scale and unprecedented attack" with drones and missiles. It vowed to respond, warning that Tehran "must pay a price for its aggression". [2]

USOil is on its first straight profitable month, helped by OPEC+ output cuts and Middle East hostilities. The new development could push prices higher and bring the 2023 peak (95.05) in the spotlight. In order to be sustained, such levels would likely need actual supply disruptions, like a closure in the Strait of Hormuz or strikes in Iranian facilities. Iran is one of the top OPEC oil producers, pumping out more than 3 million barrels/day this year according to IEA. [3]

Despite the attack, markets keep their cool and in fact, USOil faces pressure today. Iran's permanent mission said the mater "can be deemed concluded", implying an one-off strike [4]. At the same time, US President Biden spoke of "ironclad" support to Israel [5], but keeps a low profile. He has every reason to want to keep this contained, including domestic considerations. A spike in oil prices would push the already stubborn US inflation higher, in what is an election year. OPEC+ itself may not want oil prices to go to high either, as this would risk demand destruction.

USOIl is exposed to the EMA200 (82.30) and daily loses below it would pause the bullish momentum. However, sustained weakness does not look easy, as the downside is well protected, staring with the Daily Ichimoku Cloud and the ascending trend line from the December lows.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 15 Apr 2024 https://twitter.com/IRIMFA_EN/status/1779320525493326139

2

Retrieved 15 Apr 2024 https://www.gov.il/en/pages/iran140424

3

Retrieved 15 Apr 2024 https://www.iea.org/reports/oil-market-report-march-2024

4

Retrieved 15 Apr 2024 https://twitter.com/Iran_UN/status/1779269993043022053

5

Retrieved 29 May 2024 https://twitter.com/POTUS/status/1779289588890010044

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