Traders weigh outlook for US-Iran war as WTI edges higher above $90.00

• At around $90.15, WTI trades modestly higher in early Asian trading on Friday.
• Tuesday’s elections saw the Democrats sweep both the House and Senate.
• According to Trump, Tehran cannot take any action on its nuclear programme “without our approval.”

At around $90.15 in early European trading on Thursday, West Texas Intermediate (WTI), the US crude oil benchmark, is gaining ground. Traders are weighing the prospects for US-Iran relations after the US midterm elections alongside a recovery in Middle Eastern oil supplies.

Following Wednesday’s sell-off, crude prices are continuing to recover. Tuesday’s midterm elections delivered a Democratic sweep of the House and Senate, fuelling speculation that US President Donald Trump would come under pressure to bring the eight-month conflict with Iran to an end.

A rapid resolution, however, appeared far less assured. Traders are reassessing whether the US midterm election outcome would, in practice, lead to a swift conclusion to the Iran war.

Rebecca Babin, senior energy trader at CIBC, said the sell-off “could be getting a bit overdone,” adding: “The market is in a shoot first, ask questions later mode as emotions run high after the unexpected election results,”

Military escalation in the region remains the more likely outcome, according to Bob McNally, president of Rapidan Energy and a former adviser to President George W. Bush.

Without US “approval”, Iran cannot take any action relating to its nuclear programme, Trump said on Thursday. He also stated: “We need to decide whether to go further or certify it.”

Despite a rebound in crude shipments through the Strait of Hormuz, threats to commercial shipping continue. Reuters reported at least five incidents involving vessels in the Persian Gulf since Sunday.

Oil and trade remain exposed to Trump risk despite softer rhetoric

While recent geopolitical signals may point towards de-escalation, TD Securities cautions that President Trump still has considerable room to unsettle markets. The bank’s assessment is that “recent rhetoric appears to point toward de-escalation, but Trump could pursue escalation against Iran, which could send oil prices sharply higher.” A renewed flare-up in tensions could also restore the link between crude prices and interest rates: TD Securities notes that “the rates-oil correlation has reversed in recent weeks but could resume if oil prices spike sharply,” highlighting the possibility of that relationship re-emerging.

Turning to trade, TD Securities observes that “Trump has significant latitude on the trade front, though markets have become less reactive to modest escalations in trade policy.” That reduced sensitivity to incremental changes does not remove the risk of a substantial surprise. The bank cautions that “another major Liberation Day-type move could unnerve investors,” indicating that a large, unexpected policy shock could still seriously disrupt risk sentiment.

Technical Analysis: WTI retains an upward bias above the 100-day SMA

Remaining above the 100-day simple moving average (SMA) leaves WTI US Oil with a constructive near-term outlook on the daily chart. The broader uptrend therefore remains intact, notwithstanding the recent retreat from the mid-$90s. Trading between the lower and middle Bollinger Bands points to consolidation within an established bullish structure. Meanwhile, a Relative Strength Index (14) reading of around 41 indicates that momentum is easing, rather than signalling outright bearish pressure.

The middle Bollinger band at $96.75 provides the first resistance level, ahead of a stronger obstacle at the upper band near $105.15, where buying appetite could begin to weaken. Support lies initially at the lower Bollinger band at $88.30, with more substantial trend support at the 100-day SMA around $86.25. Provided these levels hold, buyers are likely to absorb pullbacks, leaving the balance of risks tilted upwards.

(The technical analysis of this story was written with the help of an AI tool. Know more.)