Oil spikes after Israel’s retaliatory strike on Iran

FXStreet
Updated Apr 19, 2024 12:28
Mitrade

  • Oil retreats from its peak above $85 after news that Israel reportedly launched a retaliatory strike on Iran. 


  • WTI Oil prices broke above $85.00, while Brent pricesbriefly ticked $90.


  • The US Dollar Index advances in the green as risk-off sentiment prevails. 



Oil prices jumped higher on early Friday trading after Israel retaliated against Iran by attacking targets in the Western of the country, two US officials confirmed to Bloomberg. Iran restricted its airspace and confirmed together with the United Nations nuclear watchdog that no nuclear facilities were hit. The retaliatory attack adds to the possibility of a direct confrontation between Israel and Iran after years of a proxy war between the two.


The US Dollar is seeing substantial inflow from several fronts: flight to safe-haven assets is the main one as investors seek refuge amid fears that the attack could be an inflection point, dragging the whole Middle East in this dispute. Secondly, the Greenback also benefits from the recent spike in energy prices, particularly Oil, as it could cause a second-round effect in inflation in the coming months if this situation lingers on for an extended period. This opens room for even another interest-rate hike from the US Federal Reserve (Fed), although it is not the base case scenario for nearly every Fed member. 


Crude Oil (WTI) trades at $83.08 and Brent Crude at $87.55 at the time of writing.



Oil news and market movers: Crucial what US will do next


Stephen Dainton, head of investment bank management at Barclays, said to Bloomberg that the retreat in Oil might be taking place this Friday with markets digesting the headlines, though, from now on Oil will trade in a higher range and might not slide back below $80 anytime soon


The US Embassy in Jerusalem has issued a security alert for government    officials and their families, according to Reuters.


Iran’s communication via state television appears to be downplaying the situation, downsizing the attacks to just a few minor blasts. The New York Times, though, mentioned three Iranian officials saying that a military air base near the city of Isfahan was hit by the attack.


Meanwhile, Israel Minister President Benjamin Netanyahu faces criticism from his National Security Minister Itamar Ben Gvir, who said in a tweet that the attack was a “weak” attempt.



Oil Technical Analysis: Initial easing before next step higher



Oil prices rallied over 4% on the back of the headlines coming from the Middle East in early morning trading on Friday. Expect to see some easing throughout this Friday if markets assume the response from Israel was contained and Iran keeps its head cool and does not retaliate. Still, markets are likely to remain very headline-sensitive until Iran officially communicates. 


With geopolitical tensions lingering, the $83.34 and $90 handle should remain in grasp. One small barrier in the way is $89.64, the peak from October 20. In case of further escalating tensions, expect even September’s peak at $94 to become a possibility, and a fresh 18-month high could be on the cards. 


On the downside, $80.63 is the next candidate as a pivotal supportive level. A touch softer, the convergence with the 55-day and the 200-day Simple Moving Averages (SMAs) at $79.88 and $79.57 should halt any further downturn. 


US WTI Crude Oil: Daily Chart

US WTI Crude Oil: Daily Chart


* The content presented above, whether from a third party or not, is considered as general advice only.  This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.

Do you find this article useful?
Related Articles
placeholder
Crude Oil Trading: How To Invest In WTI/Brent Oil?Here we'll cover different ways to invest and trade in crude oil, including using Contracts for Difference (CFDs) on Mitrade. We'll also provide tips and strategies for successful trading.
Author  Mitrade
Here we'll cover different ways to invest and trade in crude oil, including using Contracts for Difference (CFDs) on Mitrade. We'll also provide tips and strategies for successful trading.
placeholder
WTI flirts with weekly trough, remains depressed below mid-$80.00sWest Texas Intermediate (WTI) US Crude Oil prices remain under some selling pressure for the third successive day on Friday and trades near the weekly low, around the $80.30 region during the Asian session.
Author  FXStreet
West Texas Intermediate (WTI) US Crude Oil prices remain under some selling pressure for the third successive day on Friday and trades near the weekly low, around the $80.30 region during the Asian session.
placeholder
WTI Oil Price Remains under Pressure at the $80.00 Level, Focus on the US Purchasing Managers' Index (PMI). The economic troubles in China are weighing on WTI oil price.
Author  FXStreet
The economic troubles in China are weighing on WTI oil price.
placeholder
WTI Price Analysis: Oil prices Drop as the USD Recovers, OPEC Cuts WTI declined towards $73.25, seeing 1.50% losses. The US Dollar measured by the DXY index rose towards 103.70, weighting on the black gold.
Author  FXStreet
WTI declined towards $73.25, seeing 1.50% losses. The US Dollar measured by the DXY index rose towards 103.70, weighting on the black gold.
placeholder
WTI Moves Upward Near $75.50 on Dovish Fed Outlook, Maersk, CMA CGM Return to Red SeaWTI price gains ground as expected rate cuts could help in increasing oil demand.
Author  FXStreet
WTI price gains ground as expected rate cuts could help in increasing oil demand.