Oil prices are again rising into triple digit levels due to the lack of any breakthrough in the US-Iran “negotiations” and the increasing risk of an escalation over the weekend. Trump has been jawboning prices throughout the entire week with ceasefire comments and claims that Iran has been “begging” him for a deal. Meanwhile, the US military buildup in the Middle East increased the speculations of a potential ground invasion.
Late yesterday, Trump extended the ceasefire through April 6, right as major equity indices were on the verge of breaking to new monthly lows and Treasury yields were pushing toward fresh highs. He claimed Iran requested the extension, but the Iranians denied such claim.
It looked like another attempt to jawbone the market, but this time it didn’t have the same impact as earlier in the week and the losses were quickly faded. We might see more hedging into the weekend risk throughout the day which should keep oil prices supported into new highs.
If we get a serious escalation over the weekend, we can expect WTI to open above the 120.00 handle and all the other markets in deep red. The probability of a recession at that point will be very high.
On the 4 hour chart, we can see the slowly erosion of Monday’s losses as speculations of a potential ground invasion increased. Unless Trump jawbones prices again or we get a clear breakthrough, we can expect oil to rise back into the 102.00 resistance. If we get a pullback, the buyers will likely lean on the trendline with a defined risk below it to keep pushing into new highs, while the sellers will look for a break to increase the bearish bets into the 78.00 support.
