Middle East Tensions Fuelling Oil Rally


Oil Tanker Attacked in Red Sea

Crude prices are in the spotlight as we start the new week following reports over the weekend of fresh violence in the Middle East. Despite the recent US and UK airstrikes on Houthi rebel sites in Yemen, the group carried out fresh missile attacks against ships in the Red Sea this weekend, including a UK oil-tanker belonging to the Trafigura group. Following the attack, an attempted attack on a US ship was defended against when an anti ship missile was shot down. With attacks in the region showing no sign of stopping, oil traders are bracing for extended disruption, likely to lead to higher prices near-term.

US Soldiers Killed in Jordan

Separately to the incidents in the Red Sea, there was news over the weekend of three US soldiers killed and one wounded in a drone attack on a base in Jordan. The US has attributed the attack to Iran-backed rebels, though Tehran has ruled out any involvement in the killings. With fears now of a US response and a further escalation of violence in the region, the backdrop in the Middle East is looking increasingly precarious. Given the risks of severe disruption to oil producing states, crude prices look likely to retain a bid going forward and remain vulnerable to bullish risks on further such news.

Technical Views

Crude

The rally in crude over the last week has seen the market probing above the 77.64 level. The initial move has found selling interest for now. However, with momentum studies bullish, the focus is on a further push higher and a test of the 82.59 level next. To the downside, 72.61 remains key support to note.



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