(P1) Crude oil prices dipped below $100 per barrel after a senior Iranian official announced that a one-week ceasefire agreement in Lebanon is expected, testing the market's geopolitical risk premium. West Texas Intermediate crude traded at $98.39, down 11.79 percent for the week, as traders reassessed supply risks that had recently pushed prices to four-year highs.
(P2) "The Strait is 'not open' despite the ceasefire announcement," Sultan Al Jaber, Chief Executive Officer of Abu Dhabi National Oil Company (Adnoc), said on Thursday, adding that passage remains subject to "permission, conditions, and political leverage." He emphasised that global energy security depends on the Strait being opened "fully, unconditionally, and without restriction."
(P3) The move extends a sharp reversal from the prior week when May WTI crude reached a high of $117.73 on supply fears. The subsequent collapse to a low of $91.05 established a wide, volatile range. Brent crude, the global benchmark, has seen similar swings, having touched $119 per barrel at the peak of tensions before retreating.
(P4) The market remains on edge, with analysts noting that if the conflict is not resolved and the Strait of Hormuz remains restricted beyond May, crude prices could reach the psychologically significant level of $150 per barrel. Such a spike would raise input costs across industries, potentially triggering broader inflationary pressures and slowing global economic growth.
The potential ceasefire in Lebanon follows a fragile, two-week truce between Washington and Tehran, which has been fraught with uncertainty. Iranian Parliament Speaker Mohammad Bagher Ghalibaf accused Israel of continuing a "proxy war" against Hezbollah in Lebanon, arguing the attacks undermine the spirit of the agreement.
This persistent instability has kept traders cautious. Further complicating matters, Iran has issued guidance for alternate shipping routes through the Strait of Hormuz, citing the risk of sea mines. Shipping insurers have raised premiums for vessels transiting the region, adding to transportation costs that are ultimately borne by consumers. According to a report from Mint, Tehran is also reportedly charging nearly $2 million per vessel to pass through the Strait, which translates to roughly $1 per barrel.
From a technical perspective, the market's direction in the coming week will likely be determined by its reaction to the $104.34 pivot point for WTI crude. A sustained move above this level would signal the return of buyers, potentially creating the momentum to challenge the recent high of $117.63.
However, a failure to overcome $104.34 will indicate the presence of strong selling pressure. In this bearish scenario, a break into the major downside target zone of $86.30 to $78.91 is possible. New buyers could emerge in that range, but continued weakness could see a deeper correction. The elevated volatility suggests the market has entered a corrective phase, balancing lingering supply risks against a stall in upside momentum.
This article is for informational purposes only and does not constitute investment advice.
