Oil Extends Rally as Hormuz Risks Deepen and Peace Hopes Fade

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Key Takeaways

*Oil is being driven primarily by the Hormuz shipping crisis, not normal supply-demand fundamentals.

*Trump’s rejection of Iran’s peace proposal reignited fears of prolonged disruption.

*Tankers using covert navigation suggests rising physical security risks.

Market Summary

Global oil fundamentals remain strongly bullish as geopolitical tensions in the Middle East continue to dominate market sentiment and overshadow traditional supply-demand dynamics. The primary driver remains the ongoing instability surrounding the Strait of Hormuz, a critical shipping route responsible for transporting nearly one-fifth of global crude oil and LNG supplies. Recent reports showing multiple oil tankers moving through the region with tracking systems disabled have intensified concerns over maritime security, insurance costs, and potential supply disruptions. Although physical production losses remain limited for now, the market is aggressively pricing in the risk of delayed shipments, restricted flows, and possible escalation that could further tighten global energy supply conditions.

Market sentiment turned even more bullish after U.S. President Donald Trump rejected Iran’s latest peace proposal, calling it “totally unacceptable,” which significantly reduced hopes for a near-term de-escalation in the region. The collapse in ceasefire optimism immediately pushed Brent crude back above the $104 level while WTI approached the psychological $100 mark. Investors now fear that tensions between the United States and Iran could prolong disruptions around Hormuz, especially as military risks and tanker security concerns continue to rise. The latest geopolitical developments have also revived fears of broader regional instability, prompting traders to rebuild geopolitical risk premiums across the oil market.

At the same time, Saudi Aramco added to bullish sentiment after CEO Amin Nasser warned that approximately one billion barrels of oil supply have effectively been disrupted over the past two months and that market recovery could take several months even if shipping routes reopen quickly. This statement reinforced the market view that the current situation is not simply a short-term panic event, but a potentially prolonged structural disruption to global energy logistics. The warning from Aramco also highlighted the growing disconnect between production capacity and actual deliverable supply, as transportation risks rather than pure output limitations are becoming the market’s biggest concern.

Further supporting higher oil prices, OPEC+ production increases have failed to calm the market, with traders largely dismissing the group’s latest symbolic output hike. Investors believe additional production offers little relief if crude cannot move safely through key shipping corridors. Meanwhile, the United Arab Emirates’ decision to officially exit OPEC has introduced fresh uncertainty into the long-term structure of global oil supply coordination. Markets are now debating whether the move could eventually weaken OPEC’s influence and increase future volatility in production policy, particularly if the UAE later chooses to expand output independently.

Despite the strong bullish backdrop, traders remain cautious about several downside risks that could quickly reverse the rally. Any surprise diplomatic breakthrough between the United States and Iran, emergency strategic petroleum reserve releases, or signs of global demand destruction caused by persistently high prices could pressure crude lower in the short term. However, as long as geopolitical tensions remain unresolved and shipping risks around the Strait of Hormuz continue, oil fundamentals are expected to stay firmly supported with elevated volatility likely to persist across global energy markets.

Technical Analysis

Crude Oil, H4

Crude oil extended its bullish recovery over the past day, rebounding strongly from the key 91.93 support zone after sellers failed to sustain the previous breakdown.However, crude oil remains under pressure despite the recent rebound from the 85.90 support zone. Price previously failed to sustain above the ascending trendline and has since broken lower, signaling that the earlier bullish structure has weakened. Although buyers managed to push price back above the 91.95 Fibonacci support area, the market is still trading below the key 0.382 resistance near 96.50 and remains vulnerable to further downside pressure.

Momentum indicators are showing early signs of recovery but confirmation is still limited. RSI has bounced from near oversold territory and is now recovering above 50, suggesting bearish momentum is easing. At the same time, MACD is attempting a bullish crossover from deeply negative levels, which could indicate short-term stabilization or a relief rebound if buying momentum continues building. Overall, the market is showing early signs of recovery after yesterday’s rebound, but confirmation of a stronger bullish reversal will depend on whether buyers can continue building momentum above the current resistance levels.

Resistance Levels: 99.45, 105.55

Support Levels: 91.95, 85.90