WTI Crude Oil Forecast: Asymmetric Reactions to Iran News Continues

Iran, WTI Crude Oil Key Points

The US and Iran made progress toward signing a Memorandum of Understanding toward peace over the weekend.
Traders continue to shrug off any signs of escalation in the Middle East.
WTI’s next support levels to watch are around $85 (the late March and early May lows) and $80 (essentially the bottom of the post-war range).

The long holiday weekend in the US and UK was good news, not just for the unseasonably warm weather, but also for apparent progress toward a “Memorandum of Understanding” toward peace in Iran. Even today’s inevitable return to work and setbacks in the Middle East are not deterring the broad optimism yet.

Over the weekend, the US and Iran reportedly reached general agreement on a 60-day deal to stop the conflict and begin a path toward reopening the Strait of Hormuz, with only the issue of frozen Iranian assets as the “final obstacle” to be ironed out. Despite that apparent progress, the US and Iran exchanged “self-defense” strikes in the past 24 hours, while Israel and Lebanon continue to battle in Southern Lebanon.

Looking to prediction markets, the expected probability of traffic in the Strait of Hormuz returning to normal by the end of June (the market’s biggest concern) have reverted back to essentially a coinflip after spiking toward 70% over the weekend:

Source: Polymarket

Ultimately, the price action so far this week underscores that markets maintain an asymmetric reaction function to news out of Iran: Any positive headlines lead to large rallies in risk assets and drops in oil prices, while negative headlines only drive token declines in risk assets and limited spike in oil prices. Until that dynamic shifts, traders will continue to give the established trends the benefit of the doubt.

Crude Oil Technical Analysis: WTI Daily Chart

Source: Tradingview, StoneX

Speaking of established trends, WTI Crude Oil hasn’t had much of a clear trend over the last six weeks or so, with prices carving out a broad symmetrical triangle pattern over that period. This weekend’s news was the catalyst for a breakdown from that pattern, suggesting that the path of least resistance is now to the downside in the short term.

The next support levels to watch are around $85 (the late March and early May lows) and $80 (essentially the bottom of the post-war range), with a formal signed agreement as a potential near-term bearish catalyst. Meanwhile, a rally back above the 50-day EMA near $93 would shift the short-term bias back to the neutral morass that has frustrated traders on both sides for weeks now.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.