Oil price downside capped by ongoing US-Iran tensions

Crude oil recovered some of its losses on Thursday as traders appeared to recognise that Trump retains the legal authority to conduct military operations against Iran even if Democrats control Congress.

The dynamic between the US and Iran has not shifted significantly. Trump stated he must decide on whether to take additional action against Tehran, though he noted he would prefer not to obliterate the remainder of Iran.

Axios reported that Trump met with his national security team before those remarks, while CENTCOM is said to be completing preparations for possibly resuming large-scale combat operations. No fresh orders have been given, however.

Diplomatic channels remain active. Iran is said to have submitted a fresh nuclear proposal to Washington via Qatar, but a senior Iranian official indicated Tehran would only engage on the matter if the US satisfies its seven demands. Fars News further reported that Iran does not foresee further diplomatic moves until its conditions are fulfilled.

The New York Times reported that Iran is evaluating proposals from mediators regarding its nuclear programme, with Vice President Vance reportedly becoming a key backer of Qatar-led mediation efforts.

US military strikes remain a possibility, as Trump could opt for limited attacks on Iranian nuclear facilities rather than broader strikes on energy infrastructure.

Going forward, attention will stay on developments between the US and Iran. A diplomatic resolution would greatly strengthen bearish momentum and could bring oil prices back to pre-war levels swiftly. An escalation, conversely, could spark another rally driven by a higher risk premium, though that rally might prove short-lived if Trump launches limited strikes merely to maintain credibility before withdrawing from the conflict.

CRUDE OIL TECHNICAL ANALYSIS – DAILY TIMEFRAME

On the daily chart, crude oil extended its gains after bouncing off the key 87.00 level. The broken channel may act as resistance if the price retests the bottom trendline. Sellers are expected to step in around that broken trendline, with a defined risk above it, aiming for a drop below the 87.00 level and targeting the 80.00 area. Buyers, on the other hand, will want to see the price break higher to build bullish momentum toward the 110.00 resistance.

CRUDE OIL TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME

On the 4-hour chart, a downward trendline has been defining bearish momentum. There has been neither a rejection nor a clear breakout, rendering it ineffective. If another pullback to the 87.00 handle occurs, buyers are expected to step in around that level, with a defined risk below it, continuing to target the 110.00 resistance. Sellers will look for a break lower to build bearish bets toward the 80.00 handle.

CRUDE OIL TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME

On the 1-hour chart, a minor support zone exists around the 89.00 level, where the price has been rejected several times in recent days. Buyers stepped in near that support, with a defined risk below it, to push toward new highs. Sellers will want to see the price break lower to position for a drop below the 87.00 level. The red lines mark the average daily range for today.

UPCOMING CATALYSTS

Today concludes the week with the US NFP report and the University of Michigan Consumer Sentiment survey, but the primary focus remains on US-Iran developments.