Oil Holds Gains On Increased Geopolitical Risk

Oil prices rallied over 4% following the atrocities in Israel and the subsequent increase in tensions in the Middle East. The impact of events on oil flows is currently highly uncertain and may result in a risk premium added to oil prices. The possible involvement of Iran potentially adds to risks since its oil exports had been allowed to rise recently to ease tight supply. If sanctions are increased on the country, it could close the Strait of Hormuz which sees 17mbd.

• WTI rose 4.4% to close at $86.38. It has started today slightly higher at $86.44. It reached a high during the APAC session of $87.24 but didn’t breach $87 again on Monday. Initial resistance is at $87.71, the 20-day EMA, and support at $81, August 31 low.
• Brent increased 4.2% to $88.16. The break of certain levels last week confirmed a bear cycle. Initial resistance is at $89.96, the 20-day EMA, and support is $83.84, October 5 low.
• Apparently Saudi Arabia was close to recognising Israel before the weekend’s events which would have meant a normalisation in relations. It now seems this is unlikely and some are suggesting that that may mean Saudi Arabia is less likely to increase its oil supply. The US still believes though that the recognition can still occur.