Oil Oversold as Middle East Risks Persist

Oil prices remain under pressure despite ongoing geopolitical risks in the Middle East. Markets continue to weigh the threat of potential disruptions, especially involving Iran and regional conflict.

Israeli Prime Minister Benjamin Netanyahu has indicated to the Biden administration that upcoming retaliatory strikes will focus on military targets rather than oil or nuclear facilities. However, oil-related sites could remain potential targets depending on Iran’s response.

Iran currently accounts for about 4% of global oil production, but broader concerns extend beyond its output. The Strait of Hormuz remains a key vulnerability, as roughly 20% of the world’s oil and LNG shipments pass through this narrow route bordered by Iran, the UAE, and Oman. Any escalation in the region could severely impact energy markets.

Technically, if WTI fails to hold above the $70 support level, prices could decline further towards $66.90, the October low, and potentially to $65.50, a level last seen in September.