Oil rally persists as Saudi-Houthi conflict and US-Iran strike risk underpin prices

Crude's bullish momentum has been building gradually since The New York Times reported that US and Israeli military planners have prepared options for renewed strikes against Iran after the US midterm elections, with additional forces expected to reach full deployment by early November.

The Saudi-Houthi conflict, for its part, is still going on, with the Houthis lately targeting Saudi airports and energy infrastructure, including a reported attack around Dammam that left two people dead and eight injured. Following the latest security incidents, Saudi Aramco directed employees to vacate its Dhahran headquarters and work remotely.

Attacks in the Strait of Hormuz have picked up since Iran said in early October it would close the illegal routes the US uses to escort ships through the strait. The IRGC claimed yesterday that it struck four vessels and that three others were damaged by naval mines. Iran said this morning that unauthorized vessel traffic in Hormuz had stopped after the sustained strikes.

Looking ahead, oil remains supported by Middle East tensions and the prospects of another US attack on Iran after the midterms. Unless the Saudi-Houthi conflict cools or US-Iran negotiations yield a surprise breakthrough, crude prices will probably keep moving higher.

CRUDE OIL TECHNICAL ANALYSIS – DAILY TIMEFRAME

Crude oil (CFD contract) is edging higher on the daily timeframe, with the rising prospect of another US attack on Iran adding to the risk premium. A dip into the 96.77 zone should see buyers enter with risk defined below the level, keeping the 110.00 resistance as the target. If the market reaches that area, sellers can be expected to step in with risk above the resistance, positioning for a fall back toward the lower bound of the channel.

CRUDE OIL TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME

On the 4-hour view, a shallow upward trendline is defining the bullish momentum. Buyers will probably keep leaning on that trendline, with risk placed below it, as they aim for new highs. Sellers, meanwhile, will be looking for a break to the downside to prolong the drop toward the lower boundary of the channel.

CRUDE OIL TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME

On the 1-hour view, there is little to add: buyers continue to enjoy a more attractive risk-to-reward setup around the trendline, while sellers would need a break below the trendline and the 96.77 level to aim for a deeper retracement to the lower boundary of the channel.

UPCOMING CATALYSTS

The week ends today with the release of US Flash PMIs, but the focus will stay fixed on Middle East developments.