Oil Price Forecast: US–Iran Tensions Push WTI Toward $66 and Brent Toward Breakout

Key Points

• Oil prices surged due to escalating U.S.–Iran tensions, with WTI reaching $65 and Brent hitting $71.
• The risk premium remains limited as markets expect uninterrupted oil supply through the Strait of Hormuz.
• Technical analysis indicates breakout resistance for WTI at $66–$71 and Brent at $72–$74.

Market Overview

Recent military developments between the United States and Iran, including joint naval drills, have led to a spike in oil prices. WTI Crude oil (CL) has rallied to $65, while Brent Crude oil (BCO) has reached the critical level of $71. The geopolitical tensions have caused a short-term increase in oil prices, but the market remains cautious.

Risk Premium Analysis

The current risk premium in the oil market is moderate, primarily due to the expectation that oil supply through the Strait of Hormuz will remain largely uninterrupted. Historically, conflicts in the region have not led to sustained supply disruptions, as all parties involved are motivated to keep oil flowing to avoid economic damage. This belief limits aggressive upward movements in oil prices.

Two scenarios are currently being considered:

1. A limited deal between Washington and Tehran could ease tensions and lower oil prices.
2. A military strike that does not damage infrastructure may cause temporary price spikes.

However, the market consensus is that production will remain stable unless there is a significant supply shock, such as Iran targeting oil infrastructure.

WTI Crude Oil Outlook

The weekly chart for WTI Crude oil shows a strong rebound from a long-term support level of $55, with the price approaching a key resistance level around $71. A break above this level could lead to prices reaching $77 and $80. Conversely, a break below $62 could indicate further downside towards $55.

Technical indicators, including the RSI, suggest positive momentum, with consolidation observed between $62 and $66. A breakout above $66 could push prices towards $70-$71.

Brent Crude Oil Outlook

Brent Crude oil is also testing key resistance levels, with a potential breakout above $72-$74 indicating further upside towards $85. The daily chart shows that prices are approaching the $70 resistance level, defined by a descending broadening wedge pattern. The RSI indicates potential for further upside in the short term.

Conclusion

While geopolitical tensions support oil prices, gains are limited due to stabilized supply expectations. The market is reactive to news, but the prevailing assumption is that production will not be disrupted. Key resistance levels at $71 for WTI and $74 for Brent will determine the next trend. A confirmed break above these levels could lead to higher targets, while failure to do so may keep prices within a volatile range influenced by news and diplomatic developments.