Brent crude fell more than 10% on Monday, after dropping 5.5% at the open, as hostilities between the US and Iran paused and raised expectations of a diplomatic track. The move pulled prices back through the $100 level, a point watched closely by markets, and extended the retreat following a false break above that threshold.
The sell-off took Brent to a one-week low of $87.54 and pushed it below the $90 zone, defined by the daily cloud base and the 38.2% Fibonacci retracement of the $70.13/$101.97 move. Profit-taking after the 10% slide steadied prices, with modest rebounds framed as consolidation unless conditions improve further. A sustained break of $90 and the 55DMA at $88.66 would leave the 50% Fibonacci retracement at $86.05 in view, based on the same $70.13/$101.97 range; listed resistance levels were $90.83, $91.95, $93.27 and $94.80, while supports were $88.66, $87.52, $86.05 and $83.80.
Geopolitical Easing and Market Sentiment
We are seeing Brent crude pull back sharply from its recent highs near $100 after US-Iran tensions cooled down. With the immediate threat of conflict easing, we should prepare for more downward pressure in the coming weeks as the geopolitical premium drains from the market. Historically, when oil prices fail to hold above psychological thresholds like $100, it often triggers rapid, systematic selling.
Trading Strategy and Market Outlook
We recommend that derivative traders closely watch the critical $90 support zone, which represents the daily cloud base and key Fibonacci retracements. If we get a sustained break below the 55-day moving average at $88.66, we should look to short Brent futures with a target near the $86.05 level. For risk management, we can place stop-loss orders just above the immediate resistance at $90.83.
Our view is supported by recent energy data showing that US oil production remains highly resilient, holding near historic highs of over 13 million barrels per day. This strong supply, coupled with weaker seasonal demand projections for the third quarter, means the path of least resistance is likely lower. We should use any short-term profit-taking rallies toward the resistance at $91.95 or $93.27 to establish new short positions.
