Crude Bounces Off Lows

Oil prices are on watch today as traders monitor incoming headlines around the US/Iran peace process. The crude futures market gapped lower at the open before bouncing off the lows in response to news of fresh US military strikes on Iranian missile launch sites and mine laying boats in the Strait of Hormuz. This was followed by news that the IRGC fired at a US drone in Iranian airspace. Oil prices has initially been lower amidst optimism that the US and Iran are close to reaching a deal. However, the attacks show just how fragile the ceasefire is and have raised fresh uncertainty among traders on Tuesday morning.

Volatility Risks

For now, crude looks likely to continue to rebound while traders await fresh headlines. Any further attacks will be firmly bullish for crude, adding to concerns over the integrity of the ceasefire. However, if no further attacks are noted and we hear some reassurance from Trump over the ceasefire and the health of negotiations, this should see crude start to turn lower again as risk sentiment improves. The big issue for markets is getting a solid grasp on how likely a deal is given the amount of conflicting reports and the disparity between Trump claiming a deal is close then launching fresh strikes. In this context, near-term volatility risks remain elevated and crude remains vulnerable to sharp price moves.

Technical Views

Crude

The sell off has seen price breaking down below the 95.06 level, now fast approaching a test of the 84.60 support and the triangle lows. This is a key zone for bulls to defend to maintain the broader upside bias. Below there, 77.65 is the next support to note.