Oil prices are sharply lower today, falling nearly 2.5% to just below $88 per barrel as investors increasingly price in a potential de-escalation of tensions between the United States and Iran. Brent crude is on track for its first close below $88 per barrel since the opening week of the conflict. Recent media reports suggest that diplomatic discussions are progressing, with market participants betting on a reduction in geopolitical risks and a normalization of shipping conditions in the Strait of Hormuz. However, details of any potential agreement remain subject to official confirmation.
OIL (H1, D1 chart)
Looking at oil prices, the contract tested the 200-session exponential moving average (EMA200, red line) near $85.5 per barrel before recovering part of its losses. Holding the $85 area as support could prove crucial for bulls, especially given previous price reactions in this zone, as reflected by multiple long lower shadows on recent candles.
If geopolitical tensions persist, a sustained break below these levels appears unlikely. On the other hand, if negotiations with Iran progress successfully and shipping traffic through the Strait of Hormuz returns to normal, the market may increasingly view a move back above $100 per barrel as unlikely. In that scenario, oil could come under pressure to retest pre-war price levels near $74 per barrel.
Such a move would imply a decline of roughly 17% from current levels. Key resistance levels based on Fibonacci retracements are currently located around $93 and $97 per barrel. While the end of the strong uptrend in oil prices is not yet confirmed, the probability of a broader trend reversal appears higher now than at any point since the conflict began in late February and early March.
Source: xStation 5
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