empty
30.10.2024 12:48 AM
Oil: To Be Punished, Not Pardoned

The market acts first and asks questions later. News that Israel struck military, rather than oil or nuclear infrastructure in Iran led to a 6% drop in oil prices. Brent and WTI saw their worst performance since 2022. However, investors took a more measured view the next day, realizing that Israel never intended to target Iran's oil or nuclear sites – so why react so strongly?

For a long time, geopolitical tensions have acted as a buffer against a major collapse in oil prices. Conflicts between Israel, Hamas, Hezbollah, and Iran have kept traders on edge, pricing in premiums for Middle Eastern escalation risks. With a third of the world's oil coming from this region, a flare-up could have pushed Brent above $100 per barrel.

The reality proved less dire than expected. Israel limited its response to strikes on military sites in Iran. Tehran, usually aggressive, adopted a restrained stance, leading markets to assume the conflict was resolved. They returned to fundamentals, which now point to a gradual shift in oil markets toward a surplus, pressuring prices downward. Unsurprisingly, reversal risks indicated Brent's shift from a bullish to a bearish outlook.

Dynamics of Brent Reversal Risks

This image is no longer relevant

But is the Middle East conflict truly resolved? Only six months passed between the April tensions between Israel and Iran before they flared up again. Furthermore, declining oil prices amid slowing demand and increased production may prompt OPEC+ to rethink its planned phase-out of production cuts from December. Citi recently downgraded its three-month forecast for Brent from $74 to $70 per barrel, which is unlikely to satisfy OPEC.

Oil does have lifelines, but rising prospects of a Donald Trump win in the U.S. presidential race paint a distinctly bearish outlook. Large fiscal stimuli could drive 10-year Treasury yields back above 5%, heighten inflationary risks, and force the Federal Reserve and other central banks to maintain high rates, negatively impacting the global economy and oil demand.

This image is no longer relevant

The IMF projects global GDP growth of 3.2% in 2025, but Trump's proposed tariffs could reduce this by 0.8 percentage points. By 2026, this figure could reach a 1.3 percentage point cut. The IEA, OPEC, and the U.S. Energy Information Administration already anticipate slowing oil demand. Their forecasts might need downward revisions, as the surplus in the oil market may arrive sooner than expected, fueling further bearish momentum.

Technically, Brent shows consolidation on the daily chart within a $74.15-76.75 per barrel range. A breakout below this range would justify initiating or adding to short positions.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

GBP/USD Overview – April 23: The British Pound Can't Stop Smiling

On Tuesday, the GBP/USD currency pair traded much more calmly, yet again showed signs of a "maxed-out flat" pattern. As previously noted, the US dollar has only had two behaviors

Paolo Greco 04:56 2025-04-23 UTC+2

EUR/USD Overview – April 23: Another Calm Before Another Collapse?

The EUR/USD currency pair traded more calmly on Tuesday than on Monday. The US dollar managed to avoid another fall, but it's too early to celebrate. The greenback can collapse

Paolo Greco 04:56 2025-04-23 UTC+2

USD/JPY. On the Threshold of the 139th Figure

The USD/JPY pair has been in a consistent downtrend for the fourth consecutive week. On Tuesday, sellers pushed the pair to the edge of the 139.00 area, hitting the lowest

Irina Manzenko 00:46 2025-04-23 UTC+2

The Dollar Has Been Replaced. Nature Abhors a Vacuum

Fear paralyzes, but action persists. Investors are slowly overcoming their concerns over Donald Trump's attacks on the independence of the Federal Reserve and are starting to lock in profits

Marek Petkovich 00:08 2025-04-23 UTC+2

Bitcoin Took Its Chance

Slow and steady wins the race! Bitcoin quietly broke through to its highest levels since early March amid Donald Trump's attacks on Jerome Powell. When the independence of the Federal

Marek Petkovich 00:08 2025-04-23 UTC+2

XAU/USD. Analysis and Forecast

After setting a new all-time high at $3500 under overbought conditions, gold prices are pulling back. Nevertheless, bullish sentiment remains strong due to persistent concerns over the potential economic fallout

Irina Yanina 19:02 2025-04-22 UTC+2

EUR/GBP. Analysis and Forecast

The EUR/GBP pair is losing ground today after two consecutive days of gains, trading near the psychological level of 0.8600. The pound is receiving support from optimism surrounding ongoing trade

Irina Yanina 11:52 2025-04-22 UTC+2

Why the U.S. Dollar Keeps Falling

The U.S. dollar fell to its lowest level since January 2024 after President Donald Trump's criticism of the Federal Reserve sparked concerns over the central bank's independence. The dollar weakened

Jakub Novak 11:12 2025-04-22 UTC+2

Loss of Confidence in the Fed Will Pressure the Dollar (Bitcoin Likely to Continue Rising, USD/CAD to Decline)

On Monday, the U.S. stock market experienced a sharp decline, pulling down many global exchanges, as the "turbulent" actions of President Trump continue to shift from one hot topic

Pati Gani 09:00 2025-04-22 UTC+2

Market: Still Waters Run Deep

It's impossible to inject capital into an economy destabilized by politics. Capital continues to flow out of the United States, and Donald Trump's attacks on the Federal Reserve only accelerate

Marek Petkovich 08:52 2025-04-22 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.