Crude Oil Trading Reminder: Oil prices are gradually decoupling from geopolitical tensions, and sentiment premium is retreating.

Huitong Finance APP News - The situation in the Middle East continues to escalate. According to market surveys, the U.S. is evaluating the possibility of deploying an additional up to 10,000 ground troops to the region. This move is seen as an important signal of retaining more strategic space between diplomacy and military action. On top of the approximately 5,000 Marines and thousands of airborne troops already deployed, if new forces are added, it will further strengthen the U.S. military presence near key energy corridors.
 
This development has directly triggered concerns in the market regarding the stability of energy supply. The Strait of Hormuz, as one of the most critical oil transport routes globally, accounts for about 20% of the world’s maritime crude oil transport. If the situation deteriorates, the potential risk of transport disruptions will quickly amplify oil price volatility. Meanwhile, regions housing important Iranian crude oil export facilities have also become the focus of market attention, leading to a sustained rise in supply risk premiums.
 
In terms of market performance, WTI crude oil prices have risen sharply since the end of February, increasing from around $65 to the current approximately $94/barrel, with a cumulative increase of nearly $30. Despite the significant rise, oil prices have consistently failed to effectively break through the $100 level, reflecting a change in market response to geopolitical conflicts—from an initial high sensitivity to a more rational pricing approach over time.
 
From a macro perspective, the transmission effect of rising energy prices on the economy has begun to manifest. Federal Reserve Vice Chairman Philip Jefferson stated that the current rise in energy prices has a relatively limited direct impact on overall inflation, but consumers are clearly feeling the pressure from rising oil prices. He pointed out that if energy prices remain high, they will transmit through production costs to a broader range of goods and services, thereby providing ongoing support for inflation.
 
At the same time, concerns about economic growth are also heating up. Goldman Sachs estimates that if oil prices remain elevated for an extended period, the U.S. labor market may lose about 10,000 jobs per month within the year. Although the current job market remains balanced overall, its stability is under test against the backdrop of rising energy costs and external uncertainties.
 
Against this backdrop, market sentiment has also shown subtle changes. On one hand, geopolitical conflicts continue to support oil prices; on the other hand, as the duration of conflicts extends without further substantial escalation, investors are gradually exhibiting signs of “desensitization” to risk events. This change in sentiment has led to a weakening of the upward momentum in oil prices, with the market beginning to refocus on supply and demand fundamentals.
 
From a technical standpoint, daily structures indicate that WTI crude oil remains in a fluctuating upward channel, but the $100 level above has formed significant psychological and technical resistance. Multiple attempts to break through have shown strong selling pressure; support levels below are concentrated around $90 and $85, forming a phased defense line. In terms of momentum indicators, MACD’s high position is slowing down, indicating that upward momentum is marginally weakening, and it may enter a consolidation phase in the short term. Observing the 4-hour cycle, oil prices are showing characteristics of a high-level consolidation, with short-term support around $92. If this level is broken, a retest of the $90 area may occur; resistance above remains in the $95-$97 range, requiring new fundamental drivers for a breakthrough. Overall, the short-term trend is centered around range-bound fluctuations, awaiting new catalytic factors to emerge.
 
Editor’s Summary:
The current logic of oil price operation has gradually shifted from a single geopolitical drive to a dual game phase of “geopolitical + fundamentals.” Although the situation in the Middle East still provides a bottom support for oil prices, the market’s sensitivity to conflicts has decreased, making it difficult for prices to form a unilateral upward trend. The key to future oil price trends lies in two points: whether the geopolitical situation further escalates, and whether global demand can maintain resilience. In the absence of new risk events, oil prices are likely to remain in a high-level range-bound pattern, while once demand weakens or supply recovers, there will be downward pressure on prices.
 
(Contributor: Cao Yanyan HA008)
 
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