Technical analysis: Crude oil extends rally on persistent Middle East tension

Crude oil futures have climbed steeply as Middle East tensions escalate and worries over global supply security intensify.

The U.S. military reported destroying five Iranian oil tankers following Iranian missile strikes on a U.S. warship. In retaliation, Iran attacked a U.S. base in Jordan and warned of further strikes on Persian Gulf shipping.

The hostilities expanded further when Iranian-backed Houthi militants struck multiple Saudi cities and oil installations. Overnight, Iran claimed to have attacked 10 vessels near the Strait of Hormuz, describing it as the biggest wave of attacks on shipping since the conflict started. Additionally, Iran is threatening to create new maritime exclusion zones, raising the danger of more disruptions along one of the globe's most vital oil transport corridors.

These events have attached an additional geopolitical premium to crude, pushing Brent past $100 per barrel and driving WTI toward its early-June highs.

From a fundamental perspective, supply worries are bolstering the buying side. On the technical side, however, the price is nearing several key upside targets. These levels will assist traders in assessing whether buyers can stay firmly in charge—or if they are becoming overextended and prone to a pullback.

What do the technical indicators suggest?

Crude oil futures are pushing to fresh highs, hitting their most elevated point since early June. The session topped out at $96.68, comfortably above the low of $93.76.

The immediate upside target is the June 3 high of $97.00. Beyond that is the 61.8% Fibonacci retracement of the decline from the April 8 high, at $98.41. Should buyers clear and hold above those levels, the psychologically significant $100-per-barrel mark would be within reach.

During yesterday's session, crude oil dipped intraday and probed its uptrending 100-hour moving average around $91.80. Buyers used that moving average as support and drove prices significantly higher. A comparable move took place on Monday, which reinforces the technical significance of that level.

What relevance does this hold for traders?

If a technical level withstands several tests, it indicates that buyers are employing it to set and confine their risk exposure. So long as the price stays above that level, those buyers maintain strong control. Should the level be breached, however, those same buyers could be compelled to unwind their positions, paving the way for a more substantial decline.

The 100-hour moving average is currently situated at $92.67, just under the 50% retracement of the drop from the early April high, which stands at $92.47. Combined, these two levels create a critical support zone.

For the technical bias to shift back to bearish, traders would need to see prices slip below both the 50% midpoint and the 100-hour moving average. Without that, buyers remain largely in command, eyeing $97.00, then $98.41, and possibly $100.