Oil Is Seeking a Reason to Climb

Brent crude prices plunged 11.9% this week to $68.10 per barrel — a dramatic reversal that erased the entire geopolitical risk premium built up over recent weeks. Just on Monday, that premium was estimated as high as $13.70 per barrel. In hindsight, the events of the weekend marked a seismic shift for energy markets.

Last Wednesday, it became evident that Israel alone would not succeed in disabling Iran’s nuclear infrastructure. On Thursday evening, the U.S. government signalled that a decision on further action would be taken by President Donald Trump within two weeks. In response, oil prices dropped 3.6% to $75.63 per barrel, with market jitters growing over unusual activity by U.S. strategic bombers.

These concerns were soon justified. On Saturday, the U.S. launched a missile and bombing campaign targeting Iranian nuclear sites. By Monday, speculation was rife regarding the conflict’s next stage. Despite closing the previous week within resistance at $76.00–78.00 per barrel, a breakout seemed imminent. A move above that level would have opened the path toward $86.00–88.00, or even beyond $100, should Iran take radical action.

Initially, the narrative supported such a scenario. Iran’s parliament approved a bill to close the Strait of Hormuz that accomodates around 20% of global oil exports traffic. The IRGC Navy confirmed preparations to block the vital route. Brent surged 4.2% to $80.56 in early Monday trading. But the rally was short-lived. Iran’s actions turned out to be largely symbolic. Tehran had warned Qatar ahead of its retaliatory missile strike on a U.S. base, and all missiles were intercepted without casualties.

With no further escalation, crude prices collapsed. Brent fell by 10.0% to $69.57 on Monday. That evening, President Trump declared a ceasefire between Israel and Iran. The announcement was confirmed by both parties the following day, triggering an additional 3.8% drop to $66.83, the level at which the war premium initially began to build.

Though the geopolitical crisis appears resolved for now, Brent crude remains above key support at $66.00–68.00. As long as that level holds, the baseline scenario suggests a potential rebound toward the $76.00–78.00 zone. This view is bolstered by recent investor positioning: the United States Oil Fund (USO) reported $21.8 million in net inflows last week and an exceptional $210 million just on Monday — suggesting large investors are positioning for a bounce off the $70.00 level.

Fundamentals offer mixed signals. U.S. oil inventories dropped by 5.83 million barrels, far exceeding the expected 1.83 million decline. Yet, on its own, this is insufficient to trigger a strong price recovery. Meanwhile, some softening in the Federal Reserve's tone provides modest support to markets — though, again, not enough to fuel a sustained rally.

The last time Brent crude suffered a similar sharp correction, from $75.00 to $58.60 in April, it was driven by tariff-related trade tensions. Today, those risks linger. Although the U.S. and China have reached a temporary truce, lingering uncertainty continues to weigh on sentiment.

Nonetheless, Brent crude appears to be seeking a reason to rebound. A recovery above $70.00 looks technically justified, though the absence of a new bullish catalyst means any move higher is likely to be gradual. Without a fresh driver, oil may remain range-bound.