Oil futures surged more than 3% as traders weighed the escalating geopolitical tensions in the Middle East. Concerns over potential disruptions to oil supplies have driven prices higher for the second consecutive day. A recent missile attack by Iran on Israel, the largest to date, along with threats of retaliation from Israel and the United States, has intensified fears of a broader conflict.
Analysts warn that targeted strikes on Iranian oil infrastructure or disruptions to shipping in the Strait of Hormuz could lead to significant spikes in oil prices. According to PVM's Tamas Varga, any of these events would inevitably cause oil prices to soar substantially.
With Israel's ground forces entering southern Lebanon and Hezbollah being drawn into the violence, the risk of supply disruptions that could impact 4% of global oil output is being seriously considered by traders.
As the third-largest oil producer in OPEC, Iran's daily oil production has risen to 3.7 million barrels. However, significant escalations from Iran might prompt US intervention, potentially leading to stricter sanctions or direct attacks on Iranian oil facilities. Capital Economics notes that while Iran's production makes up 4% of global output, any supply disruptions could significantly drive up prices, potentially pushing them back to $100 per barrel.
In this context, OPEC+ ministers met to review market conditions, but no policy changes are expected. The group plans to gradually increase production starting in December. Nevertheless, any further escalation in the Middle East could derail these plans, pushing oil prices higher and counteracting any supply increases from OPEC+.
Given the escalating tensions, especially between Israel and Iran, the short-term outlook for oil remains bullish. If Iranian oil facilities or shipping routes are targeted, crude prices could easily exceed $100 per barrel. Traders should closely monitor the evolving geopolitical situation.
WTI crude oil initially broke above $71.95 and is expected to maintain a bullish trend, aiming for the next major target at $73.48. A failure to break $71.95 may result in downward pressure, with prices testing $70.44 before attempting to rise again. Today's expected trading range is between the support level at $70.20 and the resistance level at $73.20.
At the last update, WTI crude futures were trading at $71.94 per barrel, up 3.02%.
