WTI rose 1.89% on Thursday to about $85.85, having earlier touched a three-week high of $87.38, as traders weighed ongoing supply disruption risks and the lack of a diplomatic breakthrough between Washington and Tehran. Attention remained on potential shipping constraints through the Strait of Hormuz and the Bab el-Mandeb Strait, which together handle around 27% of global energy supply and have helped keep a risk premium embedded in crude.
In technical terms, WTI was quoted near $85.81 on the one-hour chart, holding above the 100-period SMA at $83.52 and the 200-period SMA at $82.26. Nearby support was flagged at $85.65 and $85.00, while the RSI (14) hovered around 57. Deeper downside levels were identified at $83.70, with resistance at $87.38. The report said the technical analysis was produced with the help of an AI tool.
Derivatives Strategies for A Volatile Geopolitical Landscape
We recommend that derivative traders position themselves for continued upward volatility in WTI crude over the coming weeks as geopolitical risks near critical chokepoints intensify. With WTI currently trading around $85.85 after hitting a three-week high of $87.38, the market is pricing in a substantial risk premium. Traders should consider long call options or bull call spreads to capitalize on potential breakouts past the $87.38 resistance level without risking unlimited downside.
Our outlook is heavily supported by the threat of disruption in the Strait of Hormuz and the Bab el-Mandeb Strait, which together control roughly 27% of the world’s daily energy transit. Historically, even minor threats to these waterways have triggered rapid price spikes, similar to the geopolitical shocks of 2019 that sent crude prices up nearly 20% in a single day. Given that global oil demand is projected to reach a record high of over 104 million barrels per day, any prolonged bottlenecks will quickly deplete already tight global inventories.
Impact of Policy and Technical Support Levels
We must also account for the heightened economic pressure from the Trump administration, which is actively targeting Iranian oil smuggling and financial swap lines. This aggressive stance makes a diplomatic breakthrough highly unlikely in the near term, keeping supply expectations tight. Derivative traders should watch for sudden policy announcements, using short-term put options as cheap hedges against unexpected diplomatic progress, such as the ongoing mediation talks hosted by Oman and Qatar.
From a technical standpoint, we see strong downside protection as long as WTI remains above its 100-period and 200-period moving averages at $83.52 and $82.26. If the price pulls back toward immediate support at $85.65 or $85.00, we view these as prime entry points to establish long positions. Keeping stop-losses just below the $83.50 mark will help manage risk while we wait for a sustained push toward the next major resistance targets.
