By Daniela Sabin Hathorn, senior market analyst at Capital.com
Crude oil has moved decisively higher in recent sessions, with WTI rebounding toward the $66 region after carving out a base in the mid-$50s late last year. While part of the recovery reflects technical momentum and improved risk appetite, the renewed geopolitical tension between the US and Iran is now clearly feeding into prices.
The political rhetoric has escalated sharply. A few weeks ago, President Trump’s statement that the US is “ready, willing, and able” to act with “speed and violence” was met with equally forceful language from Tehran, warning it would “respond like never before.” While these are words for now, prediction markets are assigning roughly a 70% probability of a US strike. In energy markets, probabilities matter, especially when the potential disruption involves a major oil producer and a critical global transit route.
Technical picture: from base formation to breakout attempt
Looking at the chart, WTI appears to have transitioned from a prolonged downtrend into a constructive consolidation phase. After bottoming near the $55–56 region in December, price action has formed a series of higher lows, with momentum steadily improving.
US Crude (WTI) daily chart:
Past performance is not a reliable indicator of future results.
The key technical level that had capped price action around $61.80 (previous support turned resistance) has now been reclaimed. This breakout shifts the short-term bias to the upside. The next notable resistance sits around $66, followed by $70 and the mid-$70 region, while the broader 2025 highs near $79 remain a longer-term ceiling.
RSI is approaching the mid-60s but has not yet entered extreme overbought territory. That suggests there may still be room for further upside, though the pace of gains may slow as the market assesses whether geopolitical fears translate into tangible supply disruptions.
The geopolitical premium:
Oil markets are starting to price in higher risk as Iran remains a major producer, and more importantly, sits at the heart of the Strait of Hormuz, through which roughly 20% of global oil supply transits. Even limited disruption or credible threats to shipping lanes could cause an immediate supply shock.
The key issue is not necessarily whether Iran can sustain a long-term production shock, but whether it would be willing to create short-term disruption in retaliation. In normal circumstances, such a scenario would dominate global financial headlines. That it has not fully done so reflects the fact that global supply remains relatively comfortable and inventories are not tight.
However, this creates an asymmetry: because oil prices are starting from a relatively low base, the market may be underpricing the scale of a potential upside spike if conflict materialises.
Interestingly, broader risk assets have largely ignored the escalating rhetoric. Equity markets remain focused on monetary policy, growth dynamics and AI-related themes. This muted response suggests that investors are either sceptical of imminent escalation or confident that any conflict would be short-lived.
This complacency, however, raises the risk of a sharp repricing event. If tensions move from rhetoric to action, oil could spike rapidly, bond yields could rise on inflation fears, and equities could experience a volatility shock.
What comes next?
In the near term, oil is likely to remain headline driven. Without further escalation, WTI may consolidate between $62 and $70 as traders reassess risk. But if diplomatic efforts deteriorate or military movement intensifies, a move toward $75–80 cannot be ruled out.
Conversely, if negotiations stabilise and supply flows remain uninterrupted, the geopolitical premium could fade quickly, sending prices back toward the $60 support zone.
At present, the chart suggests momentum is building. The politics suggest risk is rising. The combination creates a classic environment for volatile, event-driven trading. The market is not yet pricing in a full-scale supply shock, but it is beginning to price in the possibility.
