WTI traded near $84.90 in early European hours on Wednesday, rising towards $85.00 as the exchange of military strikes in the Middle East fuelled concern about disruptions to global oil supplies and trade. Shipping through the Strait of Hormuz has essentially halted, while Yemen’s Houthis said they had closed the Bab el-Mandeb strait to Saudi-linked shipping. Bab el-Mandeb links the Red Sea to the Gulf of Arabia, and around 12% of global trade passes through the narrows. The EIA weekly crude oil report is due later on Wednesday, with price sensitivity tied to whether inventories show a draw or build versus expectations.
On the daily chart, WTI remains capped below the 100-day SMA, keeping the near-term bias bearish despite an RSI reading of 64.01. The first upside barrier is the upper Bollinger Band near $85.95, followed by the 100-day SMA at $88.05. Support is initially seen at $80.00, then the July 17 low of $77.90, with further levels at the Bollinger middle band around $74.70 and the lower band near $63.45.
Trading Strategies Amid Geopolitical Volatility
We advise derivative traders to prepare for heightened volatility in the coming weeks as WTI spikes toward $85.00 due to severe shipping disruptions in the Bab el-Mandeb and Strait of Hormuz. With today’s EIA inventory report looming, traders should look to buy short-term straddles to capitalize on sharp immediate price swings. Historically, major geopolitical blockades in routes carrying up to 12% of global trade, combined with unexpected EIA inventory draws, can trigger rapid 3% to 5% price swings in a single session.
Technical Resistance And Risk Management Approaches
Despite the current bullish momentum, we recommend capping long positions as the commodity faces heavy resistance at the upper Bollinger Band of $85.95 and the 100-day Simple Moving Average at $88.05. Selling out-of-the-money call options near the $88.00 mark could be a highly profitable strategy to capture premium decay as the daily chart retains its overall bearish tone. The Relative Strength Index is currently sitting at 64.01, indicating that while the market is strong, it is rapidly becoming overbought and vulnerable to a sudden reversal.
If the rally stalls at these key technical barriers, we expect the price to pull back toward the solid psychological support level of $80.00. Derivative traders can structure bear put spreads targeting the $80.00 and $77.90 levels to manage risk while positioning for this potential downside. This cautious approach is backed by historical trends showing that supply-driven geopolitical spikes often fade once alternative shipping routes are established or international diplomatic pressure mounts.
