WTI rose more than 5% on Thursday, trading around $90.50 a barrel, its highest level since 11 June, as fighting between the US and Iran heightened worries over supply disruption. Prices are up around 30% so far this month, and the move accelerated after Yemen’s Ansar Allah said it had attacked two Saudi oil tankers near the Bab el-Mandeb Strait on Wednesday. Shipping risk around the Strait of Hormuz also remained in focus after Iran said the route falls under its sovereignty and its Islamic Revolutionary Guard Corps described the passage as “completely closed” while US military operations continue.
On charts, WTI kept a bullish bias by holding above the 21-day, 50-day and 100-day SMAs, clustered between about $75.50 and $88.20. MACD stayed above zero, while RSI at 71 moved into overbought territory. Resistance was flagged near $95.00 and then around $105; support levels were cited at $88.20, $82.40 and $80.00, followed by $75.52 and a lower floor at $67.
Derivative Strategy and Risk Management
We advise derivative traders to exercise caution with direct long futures contracts as WTI crude approaches the $95.00 resistance level. Since the commodity has surged nearly 30% this July to around $90.50, the market is highly susceptible to sudden profit-taking. Instead of chasing the rally directly, we suggest using bull call spreads to limit downside risk while maintaining exposure to further price spikes.
The Strait of Hormuz facilitates the transit of roughly 20.5 million barrels of oil per day, meaning any actual disruption can quickly push prices toward our next target of $105. However, this escalating geopolitical risk has sent implied volatility soaring, making outright options quite expensive to buy. We recommend utilizing vertical spreads or calendar spreads to offset these high premiums and protect against a sudden drop in volatility if diplomatic channels open.
Technical Outlook and Positioning
Because the daily Relative Strength Index (RSI) is flashing overbought signals above 71, historical data suggests we could see a brief technical pullback of 5% to 10% before the rally resumes. We should look to establish long positions closer to the immediate support level at $88.20 or the 50-day moving average near $82.40. For income-focused traders, selling out-of-the-money put options down near the $80.00 structural floor provides a solid risk-reward ratio in the coming weeks.
