- WTI crude oil falls under $85 following Iran’s drone attack on Israel, which concluded without significant impact.
- US Secretary of State Antony Blinken engages in discussions with regional leaders to mitigate tensions.
- The US Dollar Index slips below 106.00 as risk-on sentiment appears to gain momentum.
On Monday, oil prices see a slight decrease as markets breathe a collective sigh of relief following the Iranian retaliation against Israel, which resulted in minimal damage. Investors are optimistic that any potential escalation will be contained. Over the weekend, a drone and missile attack occurred, but more than 99% of the threat was neutralized by defense systems. Iran has expressed a lack of desire for further escalation, and communication between the US and Iran indicates diplomatic efforts to prevent further tensions.
Simultaneously, the US Dollar is dipping below 106.00 as some capital flows out of the currency. Global markets show signs of recovery, with equities across the board experiencing gains, which in turn reduces demand for safe-haven assets like the US Dollar. Looking ahead, traders are preparing for the release of US Retail Sales numbers on Monday.
WTI crude oil is priced at $84.48, while Brent Crude is at $88.96 at the time of reporting.
Oil news and market movers: US and Iran want de-escalation
- Goldman Sachs Analyst Daan Struyven advised Bloomberg that Oil prices should include a $5 to $10 risk premium if tensions between Israel and Iran escalate further.
- Iran has announced on Monday morning that it is not seeking additional escalation of Middle Eastern tensions.
- As tensions ease in the Middle East, a general risk-on sentiment permeates the markets.
- In the upcoming weeks, there’s potential for Oil prices to rise due to the possibility of Oil embargoes against Iran, given its position as the third-largest producer within OPEC.
Oil Technical Analysis: Risk Premium being priced out
Oil prices are moderating on Monday as markets retract the risk premium incorporated into the Oil prices before the weekend. With investors welcoming the de-escalation, a critical point to monitor is the test towards $83.34 (marked by the purple line). If this line is breached, further declines toward $80 are conceivable as more of the risk premium is removed.
However, if tensions reignite and last week’s high at $87.12 is surpassed, the $90 level becomes within reach. The $89.64 barrier, representing the peak from October 20, poses a minor obstacle. In the event of escalating tensions in the Middle East, even $94 could emerge as a possibility, potentially leading to a fresh 18-month high.
On the downside, $83.34 stands as the initial level of interest after a clear breach and subsequent support testing on April 1 and 2. If it fails to hold, $80.63 emerges as the next significant support level. Slightly softer, the convergence with the 55-day and the 200-day Simple Moving Averages (SMAs) at $79.32 should act as a formidable barrier against further downward movement.
