|

Oil surges as Iran strikes UAE and Hormuz risks fuel supply fears

  • WTI jumps above $102 as Middle East escalation fuels supply woes.
  • Attacks on UAE facilities and Hormuz risks intensified concerns over oil flows.
  • Strong US Factory Orders added support to broader Dollar and yield dynamics.

Western Texas Intermediate (WTI), the US crude Oil benchmark, soars sharply by more than 3% on Monday amid an ongoing escalation in the Middle East, as Iran launched attacks on the United Arab Emirates (UAE), while sources cited by CNN in Dubai said that they expect attacks on Iran by the US and Israel in the next 24 hours. At the time of writing, WTI trades at $102.55 per barrel, after bouncing off daily lows of $96.45.

Oil jumps as UAE attacks, Hormuz tensions raise supply disruption

UAE’s authorities confirmed that a fire broke out at Fujairah petroleum facilities after an Iranian drone attack. UAE’s defense ministry posted on X that its forces intercepted three missiles, with a fourth dropping into the sea.

The UAE announced its exit from the Organization of the Petroleum Exporting Countries (OPEC), stating it will produce Oil as needed for global markets without restrictions, while continuing to work with other producers.

A US admiral said that Iran has targeted commercial and US military ships with cruise missiles, while adding that the US blockade on Iran is exceeding expectations. He added that the US eliminated six Iranian small boats attempting to interfere with commercial shipping.

Iranian media claimed the regime targeted a US ship, but Axios reported, citing a US official, that no attack occurred. Meanwhile, President Donald Trump’s remarks about possibly resuming strikes on Iran if they “misbehave” cast doubt on the ceasefire.

In the meantime, Iran’s Revolutionary Guards Navy revealed a map showing they’re expanding their control zones near the Strait of Hormuz, which include the UAE’s ports of Fujairah and Khorfakkan, as well as the coasts of Umm Al Quwain, according to Iranian news agencies.

Over the weekend, US President Trump announced 'Operation Freedom', aimed at freeing commercial ships in the Strait of Hormuz, using the US Navy to accomplish that goal.

Meanwhile, South Korea reported a fire and an explosion on a vessel, while the UAE accused Iran of attacking an Abu Dhabi state oil firm, ADNOC, vessel with drones in the Strait of Hormuz.

In terms of data, US Factory Orders rose by 1.5% MoM in March, surpassing the expected 0.5% increase and up from 0.3% in February.

WTI Price Forecast: Technical outlook

From a technical perspective, WTI is neutral to upward biased, with buyers gaining momentum. The Relative Strength Index (RSI) is above its 50 neutral level in bullish territory, aiming higher. Worth noting that price action over the last couple of days is forming a ‘bullish engulfing’ chart pattern, an indication of further upside.

If WTI rises past the day’s high of $103.86, expect a test of the $104.00 mark. Once surpassed, the next area of interest would be the April 30 high at $107.35, followed by $108.00.

On the flipside, Oil could aim lower if traders drive prices below the $100.00 milestone. If cleared, the next area of interest would be the 50-day SMA at $89.65.

WTI daily chart

WTI Oil FAQs

WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.

Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.

The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.

OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

More from Christian Borjon Valencia
Share:

Editor's Picks

British Pound eases to 1.3450 area following downwardly revised Manufacturing PMI data

The British Pound is trimming previous gains against the US Dollar on Monday, returning to the mid-range of the 1.3400s down from fresh seven-week highs, above 1.3500 earlier on the day. Weaker-than-expected UK manufacturing data added pressure on the Pound, which rallied at the Asian session opening, amid news of a halt to the hostilities in Iran.

EUR/USD struggles above 1.1500 despite USD weakness

EUR/USD struggles with its recovery above 1.1500 in European trading on Monday, despite broad US Dollar weakness and improved risk sentiment. The USD loses traction following US President Trump's call off an attack on Iran and that talks between the two sides would happen on Monday. Traders will closely monitor the developments surrounding US-Iran negotiations and US ISM PMI data.

Gold extends range play below $4,100 as rebounding USD meets receding Fed hike bets

Gold struggles to capitalize on a modest weekly bullish gap opening, and remains below the $4,100 mark heading into the European session. The US Dollar stages a modest recovery from its lowest level since June 17, which is seen capping the upside for the commodity. The upside for the USD, however, seems limited amid renewed hopes for a US-Iran peace deal and receding US Fed rate-hike expectations.

Week ahead: US payrolls report and AI earnings to keep investors on edge

After the Fed decision, NFP report awaited for more rate hike clues. Employment also on the agenda in Canada and New Zealand. Chinese trade and Japanese wage data to be watched too. But Iran and AI headlines to remain in driver’s seat for risk sentiment.

Solana risks a steeper decline below $70 despite steady ETF inflows

Solana (SOL) is trading in the red, losing bullish momentum and remaining capped below its 50-day Exponential Moving Average at $75.68. SOL-focused Exchange Traded Funds show resilience with a monthly inflow of $14.62 million in July, while the near-term retail support wanes with the funding rate turning negative.

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?
The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.