WTI extended its rebound on Wednesday, trading near $86.20 after touching an intraday high of $87.83, the strongest level since June 11, as Middle East tensions disrupted crude movements through the Strait of Hormuz and the Red Sea. The US military carried out an eleventh consecutive night of strikes against Iran, and Tehran replied with attacks targeting Bahrain, Kuwait and Jordan. Separately, three tankers carrying Saudi crude reportedly reversed course in the Red Sea following threats from the Iran-backed Houthis.
Technically, WTI rebounded after retesting the pre-war area around $67 earlier this month, then moved back above the 200-day SMA near $74 and is now probing the 100-day SMA close to $88. Momentum gauges remain tilted higher: RSI (14) rose to 66.61, nearing overbought territory, while MACD stayed positive with the MACD line above the signal line and a widening positive histogram. Support is marked at $80.00, then the 200-day SMA at $74, with $67.00 below; resistance sits at the 100-day SMA around $88, followed by a zone near $95.00.
Geopolitical Risk and Supply Chain Disruption
We are seeing oil prices jump as intense clashes in the Middle East threaten major shipping lanes like the Strait of Hormuz, which carries about 20% of the world’s daily petroleum liquid consumption. With Saudi tankers altering their routes in the Red Sea, supply chain vulnerabilities are driving WTI toward $86.20. Derivative traders must prepare for sudden price spikes as geopolitical risk premiums expand in the coming weeks.
Technical Strategies and Trade Recommendations
From a technical perspective, we expect volatility to rise as WTI tests the critical 100-day Simple Moving Average at $88. Given that the Relative Strength Index is approaching overbought levels at 66.61, buying outright call options might be expensive due to rising implied volatility. Instead, we recommend using bull call spreads to capture potential upside toward the $95 resistance level while keeping premium costs under control.
For futures traders, we suggest establishing long positions only if WTI cleanly breaks and holds above the $88 threshold. If the market faces a temporary pullback, the $80 psychological level and the 200-day moving average at $74 will serve as crucial areas to buy the dip. We must maintain tight stop-loss orders just below these support levels to protect capital against sudden de-escalation news.
