Oil Supply Crisis causing Prices Jump Sharply as Iran Conflict Threatens Global Energy
Summary
- Oil prices surged over $1 as escalating U.S.–Israel strikes on Iran disrupted Middle East energy infrastructure.
- Brent climbed to $82.53 while WTI rose to $75.37, marking multi-month highs.
- Iraq slashed output by 1.5 million barrels per day amid export bottlenecks.
- Tanker attacks in the Strait of Hormuz halted nearly 20% of global oil transit.
- U.S. inventory build of 5.6 million barrels may limit further upside momentum.
The Oil Supply crisis caused the crude oil market to react strongly after U.S. and Israeli forces struck Iranian targets, triggering retaliatory attacks on Middle East energy infrastructure. The Middle East produces nearly one-third of global crude oil, making any disruption highly sensitive for global supply chains.
Iraq, OPEC’s second-largest producer, has already slashed output by 1.5 million barrels per day due to export bottlenecks caused by the conflict. Officials warned that nearly 3 million barrels per day could be shut in if export routes remain blocked.
Further escalating concerns, Iran is blocking the Strait of Hormuz — a critical chokepoint handling roughly 20% of global oil and LNG flows. Shipping traffic has remained largely frozen for four consecutive days.
Although U.S. President Donald Trump signaled that naval escorts and financial guarantees would be provided to secure maritime trade, shipping operators remain skeptical about the immediate restoration of safe passage.
Meanwhile, major importers, including India and Indonesia, are seeking alternative suppliers.
Technical Outlook
Brent crude is trading at its highest level since January 2025, maintaining strong bullish momentum.
- RSI on daily charts is approaching 70, indicating near-overbought conditions
- Price remains above both 50-day and 200-day moving averages
- Immediate resistance stands at $85.00
- Key support is seen near $78.50
WTI shows similar momentum, with resistance at $77.80 and support near $72.00.
However, U.S. crude inventories rose sharply by 5.6 million barrels last week, significantly above expectations of 2.3 million, which could temporarily cap upside momentum.
What Advice Should We Give to Traders?
Traders should prepare for heightened volatility as geopolitical headlines continue to drive sentiment. Short-term momentum favors bulls, but elevated RSI levels suggest caution near resistance zones.
Risk management is essential. Consider tightening stop-loss levels and monitoring developments in the Strait of Hormuz closely. Any signs of reopening or diplomatic de-escalation could trigger a sharp pullback, while extended disruptions may fuel further upside.
