Crude oil prices remain elevated even after pulling back from the 5-month high hit on Friday. The ongoing Iran-Israel conflict is the key bullish factor in the market. Even so, the geopolitical risk premium appears to be already priced in. This includes the lower probability of Iran closing the crucial Strait of Hormuz.
In the ensuing sessions, the crude oil market will be on a wait-and-see mode as any signs of supply disruptions may have a major impact on the asset’s prices.
Iran-Israel war: Has the crude oil market priced it in?
Late last week, the benchmark of global crude oil – Brent – rallied to the highest level since late January 2025 at $78.46. The surge was triggered by the Iran-Israel conflict, which entered its fifth day on Tuesday. As the two parties trade strikes, the crude oil market is keen on any crude oil supply disruptions that could be brought about by the conflict.
Indeed, it is these concerns that have held Brent crude oil price above the crucial resistance-turned-support zone of $72. On Tuesday, the asset erased some of the losses recorded in the previous session as the market reacts to the fresh wave of attacks.
Explosions and intense air defense fire has been reported in the Iranian capital of Tehran. Similarly, air raid sirens were heard in Tel Aviv.
Iran is the third-largest producer of crude oil within the Organization of the Petroleum Exporting Countries (OPEC). Prior to the attacks, the potential easing of US sanctions on Iran would allow more Iranian oil to reenter the market; weighing on the global crude oil prices. However, with the ongoing hostilities, investors are concerned about the possible disruption of oil supply and subsequent surge in prices.
Interestingly, instability in a region that produces about 25 million bpd has not been sufficient to boost global crude oil prices to $80 per barrel. While the market acknowledges the impact that supply disruptions would have on oil prices, the geopolitical risk premium appears to have already been priced in. This means that for as long as no actual supply disruptions have been reported, price gains may be capped at below January’s level of $80 per barrel.
The greatest disruption would be if Iran decides to close the Strait of Hormuz, a crucial shipping chokepoint where about a third of the world’s oil passes through. Granted, Iran may pay a huge price for blocking the seaway, seeing that it heavily relies on it for the free passage of its vessels and goods. The decision would also be counterproductive to its relationship with its major oil consumer – China.
Besides, hints that Iran may be open to negotiations have further curbed the recent oil price rallying. In regards to a possible ceasefire, the question would be whether Israel would accept the truce?
Read more: Brent crude oil price forecast after the Israel attack on Iran
OPEC expects lower oil supply growth amid a resilient economy
In addition to the Iran-Israel war, OPEC’s revision of its supply forecast has offered support to crude oil prices. The organization now expects supply from the US and other products outside the broader alliance to grow by 730,000 bpd in 2026 compared to the previous prediction of 800,000 bpd. Amid slower drilling activity and lesser capital spending, it expects US oil production to grow by 210,000 bpd; a revision from its forecast of 280,000 bpd.
Meanwhile, its demand growth forecast remains unchanged at 1.29 million bpd in 2025 and 1.28 million bpd in 2026. It bases this steady demand on strong road mobility and air-travel demand. OPEC+ decided to increase oil output by 411,000 bpd for the third month in a row in July. Its next meeting is slated for 6th July as it takes a wait-and-see approach on the ongoing conflicts.
Brent crude oil price technical analysis
Brent oil price remains elevated above the crucial resistance-turned-support zone of 72 even after pulling back from the recent 5-month high. A look at its daily price chart shows the formation of the bullish golden-cross pattern with the short-term 25-day EMA crossing the medium-term 50-day EMA to the upside.
In the immediate term, the range between the support zone of $73.72 and $76.00 will be worth watching as the market watches the ongoing Iran-Israel conflict. Escalation of the war may have the asset rally further to break the resistance of $77.50 and rise beyond. This bullish thesis is valid for as long as the prices hold steady above the crucial zone of $72.
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