Oil nears $110: Technical clarity in the Middle East's new normal
The oil market has recovered from its sharpest spikes in early April, but the price has stagnated at levels that now feel like the market's new focus. Brent crude is hovering near the $110 mark at the time of writing.
The Strait of Hormuz blockade and the fragile ceasefire
Although the April ceasefire has held on the surface, the situation is far from stable. The opposing blockades of the Strait of Hormuz by the US and Iran have kept the world’s most important oil route closed. This has caused an unprecedent supply shock, which has been counted by record-high US crude exports. Markets are now closely watching the 60-day deadline for President Trump’s War Powers Resolution. Originally, the deadline was set to expire on May 1, but the ceasefire has created legal uncertainty between Congress and the White House. If the authorization to continue the war effort is not granted, the US Navy’s role in the strait could change, affecting oil market movements.
Technical picture
The oil price has recently started to paint a clearer picture from a technical analysis perspective. A little over a week ago, Brent crude oil broke out of the channel on the charts, causing the price to rise quickly by around 10%. From a technical perspective, the next possible resistance level is found at the March 2026 highs, near the $120 mark. The price has also returned above important short-term moving averages (EMA25, SMA50), which it had already broken below in April. This suggests that the short-term momentum has turned back to the bulls.
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Brent / USD, 1 year chart
Brent / USD, 5 year chart
The impact of oil prices on the market
The persistently high oil price is putting constant pressure on central banks and, in particular, on European industry. The higher the price remains, the greater the negative impact on global growth. In addition, expensive energy can lead to persistent inflation, which could make it more challenging for the Fed and ECB to lower interest rates later this year.
What next?
Although the technical picture for oil has partially cleared up, the market is most awaiting news of either a diplomatic breakthrough or the opening of the strait, which could see very large and rapid movements in the price of oil in one direction or the other.
Indicators shown on the graphs:
● SMA200: 200-day moving average, red.
● SMA50: 50-day moving average, blue.
● EMA25: 25-day exponential moving average, yellow.
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