Oil gains amid tense situation in the Middle East 🔔

Brent crude oil gained close to 1% today, with prices responding positively around $81 per barrel. The leader of Yemen's Houthi fighters indicated that their forces are ready for further military escalation targeting the armies of the United States and the United Kingdom. US President Joe Biden emphasized that although the US does not need a broader conflict in the Middle East, they have decided to take appropriate military actions. Currently, the situation in Yemen points to a relative stalemate, and the fighters have not ceased their actions despite the presence of international troops.

Apart from the still uncertain situation in the Red Sea, there has recently been an improvement in sentiment in China, where a slowdown for many months acted as a kind of brake. However, it is not clear whether this temporary improvement in sentiment on Hang Seng will be reflected in macro data later in the year. Nonetheless, oil market traders will certainly be pricing the risk of such a scenario. A broader increase may also be supported by record-low oil inventories in Cushing, which may require gradual rebuilding, as well as the still strong economy of the United States, where it is hard to find concerns on the demand side, despite a drop in inflation expectations.

At the moment, the situation in Yemen indicates a relative stalemate, and the fighters have not ceased their actions despite the presence of international troops. In such a situation, the market may fear that the USA will not stop further attacks on the Red Sea, not risking a more extensive military operation. In a scenario where the United States fails to control the situation, the 'primacy' of the US Navy in international waters could be questioned, potentially leading to further escalations in other parts of the world.

Oil reacted with a renewed increase upon approaching $81, and the potential range of a double-bottom formation could lead Brent to new highs around $83.5 after the last rollover.

Source: xStation 5

On the daily chart of OIL.WTI, we also observe a rebound. Prices are rising after testing the SMA200 average yesterday. The nearest limitation of the current upward movement are levels at $80-$82 per barrel. Meanwhile, oil prices are supported from below by the $75 level.

Source: xStation 5