The Strait of Hormuz just became something more than a conflict zone. Over the weekend, US-Iran peace talks in Pakistan collapsed without a deal, and President Trump responded by announcing a formal naval blockade of Iranian ports. Brent crude surged more than 7% on the news, trading back above $100 per barrel this morning. The relief rally of the past two weeks has been fully unwound.
This is a meaningful escalation. A ceasefire is one thing. A naval blockade is another. The market had spent the better part of last week pricing in de-escalation and that trade is now being forcibly reversed.
The supply picture is stark. The Strait of Hormuz has been largely closed since late February. Around 20% of global seaborne oil passes through it. JPMorgan noted over the weekend that pre-closure barrels are expected to be fully exhausted from the global supply chain around April 20, which is days away. The buffer that has been keeping the market from a more severe spike is running out.
Saudi Arabia has moved to partially offset the disruption by restoring capacity on its East-West pipeline, which can move oil to the Red Sea without passing through the strait. It helps at the margin, but it does not come close to replacing what the strait normally carries.
What the chart shows
Oil's price action this year has been defined by sharp moves in both directions, driven entirely by geopolitical headlines. The move higher this morning takes Brent back into territory it briefly visited in late March before the ceasefire talk pulled it back. The 50-day moving average, which had been catching up to price during last week's pullback, now sits well below current levels again.
The key level to watch on the upside is the $110 to $115 area, where price stalled previously and where sellers may look to re-engage. To the downside, $100 is the psychological level. A sustained hold above it keeps the bullish structure intact, while a move back below could signal the market is treating the blockade as a negotiating tactic rather than a durable supply disruption.
Two scenarios
If the blockade holds and no diplomatic progress emerges this week, oil may continue to push toward the $110 to $115 area. The April 20 timeline, when pre-closure supply is expected to run dry, could act as a catalyst for further moves.
If talks resume and progress is made, oil could reverse sharply. The market has shown it can give back gains quickly when headlines shift, as last week demonstrated. Volatility in either direction is likely to remain elevated.
Disclaimer: This content is for informational and educational purposes only and does not constitute investment advice or recommendation to trade.70% of retail CFD accounts lose money. You should only invest money you can afford to lose. Past performance is not indicative of future results
This is a meaningful escalation. A ceasefire is one thing. A naval blockade is another. The market had spent the better part of last week pricing in de-escalation and that trade is now being forcibly reversed.
The supply picture is stark. The Strait of Hormuz has been largely closed since late February. Around 20% of global seaborne oil passes through it. JPMorgan noted over the weekend that pre-closure barrels are expected to be fully exhausted from the global supply chain around April 20, which is days away. The buffer that has been keeping the market from a more severe spike is running out.
Saudi Arabia has moved to partially offset the disruption by restoring capacity on its East-West pipeline, which can move oil to the Red Sea without passing through the strait. It helps at the margin, but it does not come close to replacing what the strait normally carries.
What the chart shows
Oil's price action this year has been defined by sharp moves in both directions, driven entirely by geopolitical headlines. The move higher this morning takes Brent back into territory it briefly visited in late March before the ceasefire talk pulled it back. The 50-day moving average, which had been catching up to price during last week's pullback, now sits well below current levels again.
The key level to watch on the upside is the $110 to $115 area, where price stalled previously and where sellers may look to re-engage. To the downside, $100 is the psychological level. A sustained hold above it keeps the bullish structure intact, while a move back below could signal the market is treating the blockade as a negotiating tactic rather than a durable supply disruption.
Two scenarios
If the blockade holds and no diplomatic progress emerges this week, oil may continue to push toward the $110 to $115 area. The April 20 timeline, when pre-closure supply is expected to run dry, could act as a catalyst for further moves.
If talks resume and progress is made, oil could reverse sharply. The market has shown it can give back gains quickly when headlines shift, as last week demonstrated. Volatility in either direction is likely to remain elevated.
Disclaimer: This content is for informational and educational purposes only and does not constitute investment advice or recommendation to trade.70% of retail CFD accounts lose money. You should only invest money you can afford to lose. Past performance is not indicative of future results
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.