Crude oil prices are easing as traders unwind the risk premium they had begun pricing in after reports of potential US strikes on Iran ahead of the midterm elections. The reversal followed yesterday's de-escalation, when Trump said on Truth Social that the United States was holding productive discussions with Tehran and would not attack Iran before the midterm elections.

The episode offered a clear illustration of how markets operate, pricing and repricing future expectations as new information arrives. The escalation risks had triggered a strong rally in crude oil on expectations of retaliation and supply disruptions, while the de-escalation reversed those earlier expectations, prompting traders to unwind their hedges and speculative long positions. Iran's centrality to this dynamic stems from its role as a major OPEC producer, which is why headline risk alone around its supply can be enough to move crude.

Looking ahead, Iranian Foreign Minister Araghchi said yesterday that Tehran was reviewing Washington's response to Iran's proposal and expected to reply within the next few days. Iranian crude exports have long been constrained by US sanctions, which is why the diplomatic track is viewed largely through its implications for supply. A positive outcome would lead to a major selloff in oil prices on expected supply improvement, while a negative outcome wouldn't change much at this point, although it would likely limit the downside in crude.

Crude Oil Technical Analysis – Daily Timeframe

On the daily chart, crude oil (CFD contract) is pulling back modestly after the de-escalation in tensions that followed Trump's post. If the price retraces all the way to the lower bound of the channel, buyers are expected to step in again with defined risk below the channel, keeping the 110.00 resistance as their target. Sellers, on the other hand, will want to see the price break lower to pile in for a drop into the 68.00 support next, with the 80.00 level as the first target.

Crude Oil Technical Analysis – 4 Hour Timeframe

On the 4 hour chart, the break of the downward trendline opened the door for a rally into the 96.77 level. If the price reaches that level, sellers are expected to step in with defined risk above it, positioning for a drop back into the lower bound of the channel. Buyers, for their part, will look for a break higher to increase their bullish bets into the 110.00 resistance next.

Crude Oil Technical Analysis – 1 Hour Timeframe

On the 1 hour chart, the price broke below the minor upward trendline after Trump's post as traders started to unwind the earlier escalation premium. Another trendline around the 89.50 level could act as support, where buyers will likely step in with defined risk below the lower bound of the channel, keeping the push toward the 96.77 level intact. Sellers, meanwhile, will need to wait for a break below the channel to open the door for new lows. The red lines on the chart define the average daily range for today.

Upcoming Catalysts

The week concludes today with the University of Michigan Consumer Sentiment survey, a monthly gauge of US household confidence and inflation expectations, although the release is not expected to be market-moving. The focus will remain on US-Iran developments.

Source: InvestingLive