Rajandran R Creator of OpenAlgo - OpenSource Algo Trading framework for Indian Traders. Building GenAI Applications. Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Building Algo Platforms, Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in

The Iran-Israel Tension and Crude Oil Trend Analysis

3 min read

With ongoing tensions in the Middle East, particularly between Iran and Israel, the crude oil market finds itself once again at the mercy of international instability. This blog will break down the fundamental and technical aspects of how these tensions are impacting crude oil, particularly West Texas Intermediate (WTI) crude, and provide a detailed trend analysis for traders and investors alike.

WTIC Crude – 15min intraday charts

Fundamental Analysis: Iran-Israel Tensions as a Catalyst

The latest surge in crude oil prices comes on the back of escalating tensions between Iran and Israel. The situation took a turn when missile attacks were reported by the Israeli military, leading to heightened concerns over the stability of the Middle East—one of the world’s most important oil-producing regions. As Iran is a key member of OPEC, any potential disruption to its oil supply has immediate and far-reaching consequences for global energy markets.

The significance of this tension cannot be overstated. Iran supplies nearly a third of the world’s crude oil, and any disruption could severely affect the supply chain, pushing oil prices even higher. The situation has already caused a ripple effect, with WTI crude jumping by 5% after news of the attacks broke, and Brent crude surpassing $75 per barrel. Historically, geopolitical uncertainty in the Middle East has led to sharp spikes in oil prices as markets react swiftly to any perceived threats to supply.

But beyond the headlines, there’s more at play. Countries like Israel and Iran are not just engaged in military conflict but are also significant players in global energy politics. For Iran, its oil exports are crucial to its economy, and any sanctions or disruptions in supply directly impact global energy security. Israel, on the other hand, while not an oil producer, has significant geopolitical influence that indirectly affects market sentiment.

Technical Analysis: WTIC Crude’s Sentimental Shift

From a technical analysis perspective, the recent price action in WTI crude provides valuable insights into how the market is interpreting these tensions. Over the past few days, we’ve seen a dramatic shift in sentiment, highlighted by a notable increase in the Turbo Relative Strength Index (RSI). This shift in sentiment, coupled with the formation of key technical patterns, points to a possible bullish continuation.

WTIC Crude – Daily Charts with Turbo RSI

1. Support Formation at $67.60: On the daily charts, WTIC crude has formed strong support at the $67.60 level, tested multiple times over the past trading sessions. This level now acts as a critical floor for traders looking to go long in the market. A break below this level could suggest further downside risks, but as long as prices stay above, we can anticipate upward pressure.

WTIC Crude Oil – Weekly timeframe showing swing breakout failure

2. Outside Bar on the Daily Chart: A particularly strong technical signal came with the formation of an outside bar on the daily charts, which is typically a signal of increased volatility and a potential reversal in trend. The outside bar pattern occurs when the current day’s price action completely engulfs the previous day’s range, signaling a battle between bulls and bears, with the bulls likely gaining the upper hand in this instance.

3. Turbo RSI Signals Long Opportunity: The Turbo RSI, which measures the momentum of price movements, has turned positive. Historically, when the Turbo RSI shifts upward, it is a signal that the market sentiment is becoming more bullish, providing an opportunity for traders to take long positions. The increasing RSI value is indicative of growing buying pressure, likely fueled by concerns over oil supply due to the Iran-Israel tension.

Short-Term Price Targets: $74 and $76

With the current combination of technical indicators and fundamental concerns, WTIC crude is now set to challenge higher price levels. The next immediate targets are the $74 and $76 levels. These targets align with both the recent price action and the historical resistance levels seen in the chart.

$74 Level: This has acted as a key resistance level in past price movements, and given the current geopolitical climate, it is likely to be tested in the short term.

$76 Level: Should the price break above $74, the next likely target would be $76, as traders look for further upward momentum.

These levels are critical for traders to monitor, especially if tensions escalate further, which could lead to more aggressive price action.

Volatility and Risk Considerations

It’s important to note that while the technical setup points to a bullish continuation, the market is also facing heightened volatility due to the fundamental backdrop. Any developments in the Iran-Israel conflict, whether escalations or de-escalations, will likely lead to swift movements in crude oil prices.

For traders and investors, managing risk is crucial. Tight stop-losses near the $67.60 support level could provide protection against any unexpected market reversals, while those looking for short-term gains should consider taking profits near the $74 and $76 resistance levels.

Final Thoughts and Strategic Insights

In conclusion, the combination of Iran-Israel tensions and key technical indicators such as support formation, the outside bar on the daily chart, and a positive Turbo RSI provides a compelling case for higher crude oil prices in the short term. The geopolitical situation will continue to be a driving force behind oil market volatility, and traders should remain cautious while looking for opportunities to capitalize on price movements.

With crude oil prices targeting the $74 and $76 levels, the market seems to be in a bullish phase for now. However, it’s essential to stay vigilant and track both fundamental developments and technical signals as the situation evolves.

By analyzing both the geopolitical factors and technical signals, traders can navigate this turbulent market with greater confidence and better timing, maximizing opportunities while minimizing risk.

Rajandran R Creator of OpenAlgo - OpenSource Algo Trading framework for Indian Traders. Building GenAI Applications. Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Building Algo Platforms, Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in

MCX to Revolutionize Gold Trading with the New 10-gram…

The Multi Commodity Exchange of India (MCX) is poised to make waves in the commodity trading landscape with its forthcoming launch of a 10-gram...
Rajandran R
1 min read

Gold Short Term Trend Reversal: An Analysis Amid Global…

Notably, gold reached a zenith one day before escalating tensions between Israel and Iran, marked by a Volume Spread Analysis (VSA) signal on the...
Rajandran R
1 min read

Gold Technical Analysis – Bullish View

Gold is a one trading instrument where fundamentals are outlawed while inflation is skyrocketing and globally Central banks are racing for the interest rate...
Rajandran R
21 sec read

Leave a Reply

Get Notifications, Alerts on Market Updates, Trading Tools, Automation & More