12.05.202609:13 Forex Analysis & Reviews: Oil Prices Surge Sharply

Brent crude prices increased by 0.6%, reaching around $105 per barrel. The stalled negotiations between the US and Iran, along with the ongoing blockade of the Strait of Hormuz, indicate that energy resources will remain expensive in the foreseeable future. Yesterday, US President Donald Trump expressed doubts about compliance with the ceasefire agreement with Iran, which heightened concerns about the prolonged closure of the Strait of Hormuz.

The deadlock in negotiations between the US and Iran is the main factor contributing to rising oil prices. These talks aimed at achieving peace have once again stalled, leading to increased tension in the region. The lack of progress in diplomatic efforts fuels fears of further escalation of the conflict, which could result in more serious disruptions to oil supplies.

The ongoing blockade of the Strait of Hormuz, through which a significant portion of global oil supplies pass, also has a substantial impact on prices. Any security threats in this strategically important waterway are instantly reflected in global oil markets. The uncertainty surrounding the timeline for reopening the strait is prompting traders to buy oil, driving its price higher.

Yesterday's comments from President Trump regarding Iran's compliance with the ceasefire added another layer of uncertainty. His statements raise concerns that the US may take more stringent actions against Iran, which, in turn, could lead to further escalations and consequently a prolonged closure of the Strait of Hormuz. Such a situation will inevitably lead to further increases in energy prices, which will impact the US economy.

While Trump did not clarify whether the US would resume military strikes against Iran as he previously threatened if the leadership of the Islamic Republic did not agree to his terms, this does not reduce the tension. Trump had earlier mentioned considering resuming plans to escort ships through the Strait of Hormuz; however, as past events have shown, doing so is much more complicated than saying it. Recent attempts to transit through the Strait of Hormuz have resulted in further attacks from Iran and retaliatory measures from the US Navy.

Regarding the current technical picture of oil, buyers need to reclaim the nearest resistance at $100.40. This will allow for targeting $106.80, above which it will be quite challenging to break through. The further target will be around $113.80. In the case of a decline in oil prices, bears will attempt to take control of $92.50. If this happens, a breakout of the range will deal a serious blow to bullish positions and push Oil down to a low of $86.67, with the potential to reach $81.38.