Crude Oil Dips Below 90 USD 🛢️ 📉

Brent crude futures (OIL) are sliding around 3%, diving below the psychological $90-per-barrel mark to the $87–$88 range. WTI crude (OIL.WTI) is also retreating, falling 3.4% to $82. A third consecutive session of losses was triggered by reports that the US is likely to rely on sanctions rather than further military action to pressure Iran.

US Announces Sanctions: What We Know So Far

The latest twist in the Middle East conflict was the end of a 60-day negotiation window, which concluded with Trump announcing plans for an "Economic D-Day" against Iran. In a social media post, the US President threatened any nation whose entities support Iran in any way, promising total isolation for the country. But how will this look in practice?

Key Announcements from the US Department of the Treasury:

• Direct Sanctions on Entities and Vessels: US Treasury Secretary Scott Bessent announced direct sanctions against over 70 Iran-related entities, individuals, and vessels. The list includes 26 mainland China and Hong Kong-based entities and individuals, alongside measures targeting Iran's banking sector (including Bank Melli) and the wind-down of existing sanctions exemptions.

• Targeting Five Core Sectors: The new sanctions package focuses on five key economic pillars for Tehran: shipping, aviation, digital assets, technology, and gold trading. Trump's directive mandates an immediate crackdown on oil smuggling, cash transfers, exchange houses, front companies, ship registries, and swap lines.

• Secondary Sanctions: Washington warned foreign governments that permitting local companies, airports, or financial institutions to support Iran will trigger US retaliatory sanctions. Strict timelines have reportedly been set to sever ties, and Bessent additionally threatened to sanction a key financial institution by the end of the week over its relations with Iran.

Sanctions Discount Escalation Risk... and Matter Little for Now

On one hand, sanctions might seem like another phase of an endless war; however, for markets, they significantly discount the scale of geopolitical risk and Washington's overall strategy creates room for further downside in oil. Why?

First, Washington adopting a shift in tone lowers the probability of a further military escalation.

Second, China remains the primary buyer of Iranian oil, meaning that without a direct economic strike on Beijing, global crude flows should not face worse conditions than they currently do.

Third, the market views Washington’s new stance as more "talk than action." Without secondary sanctions on Iran's key partners, an economic D-Day is unlikely to disrupt the oil market significantly. Furthermore, the true scale of the sanctions will remain muted as the Trump administration leans on "quiet negotiations."

Fourth, the opposing side of the conflict is not sitting idly by. Iran threatened that the US and its allies should prepare for a counterattack rather than assume Iran will only defend itself. China raised a yellow flag, threatening to cut off access to pharmaceuticals and critical minerals/rare earths. Qatar called the sanctions unilateral. Pakistan is reportedly preparing another peace offer for the US, while American diplomats are said to be planning a return to the Middle East.

All of this lowers the pain threshold for the US, which is why the market sees the current situation as an opportunity for oil to pull back from its local highs.

Technical Analysis: OIL (D1)

Brent crude futures (OIL) remain under clear selling pressure, currently testing a key support zone on the daily chart. Primary support for the price remains today's test of a confluence of two major exponential moving averages: the 30-day EMA ($87.52) and 100-day EMA ($87.01), reinforced near $86.40 by the 50% Fibonacci retracement level. Meanwhile, the 14-day RSI sits at a neutral 50.3 points. The absence of oversold signals leaves ample room for bears to operate, opening the door for a deeper slide. A breakdown below this support would pave the way for a drop toward the 61.8% Fibo level ($84.43).

Source: xStation5