Crude oil has been steadily building bullish momentum after The New York Times reported that the US and Israeli militaries have developed plans for renewed strikes on Iran following the US midterm elections, with additional forces expected to be fully deployed by early November.

The market is contending with escalating tensions across the Middle East on two main fronts: the ongoing Saudi-Houthi conflict and the deteriorating situation around the Strait of Hormuz.

Saudi-Houthi Conflict Continues

The conflict between Saudi Arabia and the Houthis shows no sign of easing, with the group recently targeting Saudi airports and energy infrastructure. A reported strike near Dammam killed two people and injured eight.

Following the latest security incidents, Saudi Aramco instructed staff to evacuate its headquarters in Dhahran and work remotely. The incidents highlight a vulnerability the oil market knows well: the September 2019 attack on the Abqaiq processing facility temporarily knocked out roughly 5% of global oil supply, a reminder of how much production capacity is concentrated in Saudi energy infrastructure.

Attacks in the Strait of Hormuz Intensify

Attacks in the Strait of Hormuz have intensified since early October, when Iran said it would close illegal routes used by the US to escort vessels through the strait. Iran's Islamic Revolutionary Guard Corps (IRGC) claimed yesterday that it attacked four vessels and that three others struck naval mines. This morning, Iran claimed that illicit vessel traffic in Hormuz had stopped following the continued attacks.

The stakes are high because the strait is one of the world's most critical energy chokepoints, with roughly one-fifth of global petroleum liquids consumption passing through it, according to the US Energy Information Administration.

Outlook

Crude oil remains supported amid the Middle East tensions and the prospect of another US attack against Iran after the midterms. Unless there is a de-escalation in the Saudi-Houthi conflict or a surprising breakthrough in US-Iran negotiations, oil prices face continued upward pressure.

Crude Oil Technical Analysis – Daily Timeframe

On the daily chart, crude oil (CFD contract) is slowly edging higher as the prospect of another US attack on Iran lifts the risk premium. In the event of a pullback into the 96.77 zone, buyers are expected to step in with risk defined below the level, keeping their sights on the 110.00 resistance. Should the price reach that resistance, sellers may step in with risk defined above it, positioning for a drop back to the lower bound of the channel.

Crude Oil Technical Analysis – 4-Hour Timeframe

On the 4-hour chart, a minor upward trendline is defining the bullish momentum. Buyers are likely to keep leaning on the trendline, with risk defined below it, to push into new highs. Sellers, on the other hand, will look for a break lower to extend the decline toward the lower bound of the channel.

Crude Oil Technical Analysis – 1-Hour Timeframe

On the 1-hour chart, buyers retain a better risk-to-reward setup around the trendline, while sellers need a break below the trendline and the 96.77 level to target a deeper pullback into the lower bound of the channel. The red lines on the chart define the average daily range for today.

Upcoming Catalysts

The trading week concludes with the release of the US Flash PMIs, but the focus will remain on developments in the Middle East. Key watch items include independent shipping data that could confirm or contradict Iran's claims about traffic in Hormuz, any further Houthi strikes on Saudi infrastructure and Riyadh's response, and signals on the direction of US-Iran tensions once the midterm elections have passed.