Crude Oil: Brent Eyes $110 as Tight Supply Keeps Upward Pressure Intact

• Oil holds firm as Strait disruptions persist and diplomatic progress remains limited.
• Geopolitical risk premium stays elevated with tanker incidents and stalled US-Iran talks.
• Brent outlook remains bullish with a path toward $110 unless supply flows normalize.

Crude oil prices were coming off their earlier highs by mid-morning London session as investors began the new week wondering whether and when the US-Iran stalemate would end.

There was some chatter, courtesy of Axios, that Iran has floated a fresh proposal to reopen the Strait of Hormuz — a development that’s being taken as a tentative step forward on what’s been, to put it mildly, a rather uneven road towards any sort of negotiated outcome. But that said, it’s far from a breakthrough. After last week’s relatively big rally, the risks remain tilted to the upside for oil prices.

What’s Driving the Oil Market?

Over the weekend, President Donald Trump said that he’d pulled the plug on plans to send Special Envoy Steve Witkoff and Jared Kushner to Pakistan for talks with Iran. This followed Iran’s Foreign Minister, Araghchi, leaving Islamabad without agreeing to a sit-down with US officials, which is hardly the makings of a diplomatic thaw.

As we look to the week ahead, the picture remains murky. Tehran appears unwilling to engage while the naval blockade stays in place, and Washington, for its part, is holding back its negotiators. The result is that the market is left in limbo. While risk assets try to foresee an eventual end to the blockade, for the oil market, it is the actual physical movements – or in this case, a lack thereof – of oil through the Strait of Hormuz that matters the most.

In this sort of environment, oil prices look set to keep edging higher — unless, of course, we’re met with another unexpected turn this week.

A string of recent incidents in the Strait, including tanker seizures and heightened military activity, has only served to entrench the geopolitical risk premium currently baked into prices.

Should things take a turn for the worse and escalate into open conflict, there’s clearly scope for a much sharper move upwards. For now, though, as long as access through the Strait remains constrained, that premium is unlikely to fade. Words alone — however well chosen — are unlikely to shift the dial in any meaningful way.

In the end, the direction of oil still hinges squarely on how the US-Iran situation evolves. Until there’s something more concrete on that front, the path of least resistance appears to be to the upside, with not far off testing $110.

All About Oil Flows: Demand Destruction Highly Unlikely

While increased supplies from other regions, including the US and Russia, will help the matter, the global economy remains heavily dependent on energy flows from the Gulf, and that’s what makes the Strait of Hormuz so important. The longer these disruptions drag on, the more pronounced the imbalance becomes. Yes, demand may adjust at the margins — through rationing or softer consumption — but it’s unlikely to fully bridge the gap.

Put simply, a meaningful pullback in oil would probably require a proper reopening of the Strait and a return to normal shipping flows. Until then, the risks remain skewed to the upside.

Technical Analysis and Levels to Watch on Brent

From a technical point of view, the chart of Brent continues to point higher. It has been pushing upward over the last several days with minimal pullbacks along the way.

With prices now back above the $100 per barrel level—which was broken on Tuesday of last week—the technical bias has shifted back to the bullish side. Since then, prices have remained supported on any short-term dips.

There’s likely to be plenty of dip-buying if we do see any pullbacks, unless the Strait of Hormuz situation deteriorates significantly. There are multiple support levels on the way down, including the $103.50 area, as well as the $100 per barrel level.

Keep an eye on Friday’s high of $107.45, while Thursday’s high comes in at $107.35. This makes the $107.35–$107.45 zone the first area of support to watch today.

On the upside, there is little in terms of resistance until the $110 level, which could be reached later today unless we see a surprise deal of some sort, which looks unlikely at this stage.

Beyond that, $111 is the next key level of possible resistance. Then the focus will shift to $115, and eventually $120. We could well get there if the current situation remains as it is.

Until we see a clear lower low and a reversal pattern, the path of least resistance for oil remains to the upside.

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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.

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