Oil Slides Ahead of the Weekend!

Oil prices sharply turned lower following reports that, under pressure from Beijing, Pakistan and Iran are considering a return to the negotiating table with the US. Brent futures (OIL) immediately pulled back by 1% to around $90.50 per barrel, deepening today's losses and erasing nearly all of yesterday's gains (currently: -3.5%).

Mixed Signals from the Middle East: A Potential Return of Diplomacy?

Following the recent escalation of Middle East tensions and oil prices returning to a monthly high, the market is eagerly snapping up the slightest mention of returning diplomacy, attempting to extract some end-of-week optimism. Over the longer term, Pakistan's efforts alone will not be enough, especially since both sides of the conflict are playing solely to safeguard their own interests, and reports of resuming talks are accompanied by further warnings for US citizens in the region.

Below are the key headlines from recent hours:

• Omani delegation in Tehran regarding the Strait of Hormuz: An Omani delegation arrived in Iran to discuss mechanisms for managing ship traffic in the Strait of Hormuz. Tehran advocates co-managing the waterway alongside Oman, but the US and Gulf states reject such a setup.

• China and Pakistan push for a resumption of peace talks: Under pressure from China, Pakistan is considering attempting to resume stalled negotiations between the US and Iran aimed at ending the nearly five-month-old war. Exploratory discussions took place this week in Islamabad during a visit by the Iranian interior minister.

• Tough rhetoric from Iran’s foreign minister: Abbas Araghchi stated that Iran will not bow to the US nor tolerate threats, pointing to Washington's stance as the main obstacle to peace talks. He also reported continuous consultations with Russia and China, pledging unconditional protection of Iran's interests in the Strait of Hormuz.

• US warning for citizens in the Middle East: The US Embassy in Jordan urged Americans to reconsider travel to the Middle East due to escalation risks and potential attacks by Iran and its allies. Warnings were issued regarding airspace closures and flight cancellations, and citizens were advised to avoid US military bases in Jordan.

• Trump warns Iran's allies: In his latest social media post, the US President stated that Russia or China supplying weapons to Iran "will end badly for them." Donald Trump added, however, that Xi and Putin said they do not plan such sales.

Technical Analysis: OIL (Brent Futures)

Reports of potential de-escalation in the Middle East sparked selling pressure on Brent crude (OIL). On the H1 chart, price dynamically dropped into a key support zone defined by the 120-period EMA ($90.48) and the 50.0% Fibonacci retracement ($90.16).

A breakdown below this area could open the door for further declines toward the 61.8% Fibo level ($88.93). Conversely, defending current levels could favor a corrective bounce. The immediate resistance lies at the 38.2% Fibo retracement ($91.38), followed by the 24-period EMA ($92.47). The RSI is approaching oversold territory (32.1), suggesting the possibility of a temporary easing in bearish pressure, especially if no new pro-war comments emerge from the White House.

Source: xStation5