West Texas Intermediate (WTI) futures on NYMEX dropped 1.8% to near $88.10 during the European trading session on Tuesday, marking a decline of over 6% from Monday’s high of approximately $93.50 [1]. The sharp sell-off followed Iran's agreement to halt attacks on Israeli territory after US President Donald Trump called for both nations to cease military operations [1]. Earlier, oil prices had rallied due to weekend exchanges between Israel and Iran, which raised fears of renewed conflict and potential closure of the Strait of Hormuz, a passage critical to nearly 20% of global energy supply [1]. These military operations had previously diminished hopes for a lasting US-Iran peace deal [1].
In Tuesday's European session, oil prices continued their decline as President Trump expressed optimism that negotiations with Iran are in their "final throes," suggesting the Strait of Hormuz could reopen within "two or three days" if an agreement is reached, according to The Guardian [1]. The reopening would facilitate energy flows and likely ease oil prices [1]. Technical analysis indicates a bearish near-term bias, with WTI trading below the 20-day Exponential Moving Average (EMA) at $92.16 and the Relative Strength Index (RSI) at 42.83, signaling persistent downside pressure [1]. Key resistance is at the 20-day EMA, while further declines could see prices reach the April 17 low at $78.88 if they fall below the May 29 low at $85.42 [1].
Rabobank’s Global Strategist Michael Every noted that oil prices remained largely unchanged after another escalation in the Middle East involving Israel and Iran, with markets reverting to an "as you were" stance [2]. Every emphasized that the conflict's trajectory, particularly involving Hezbollah and Iran, will be crucial for future energy pricing and broader market sentiment [2]. In the background, Yemen’s Houthis have claimed they will restart a maritime blockade of Israel in the Red Sea, which previously affected a broader range of cargo and energy flows [2]. This development poses risks to cargo and energy flows, especially as a US Navy F-18 struck and disabled an oil tanker in the Gulf of Oman and the EU imposed sanctions on Iran’s Navy [2].
Despite President Trump's assertion that "total victory" could be declared within two weeks and that Iranian negotiators are "willing to give us everything," with VP Vance describing the deal as "a home run" for the US, Rabobank cautions that the crisis is far from over [2].
CONCLUSION
WTI oil prices have experienced a significant decline following signs of de-escalation between Iran and Israel and renewed optimism for a US-Iran deal, though technical indicators suggest continued downside risk. While some market participants anticipate a resolution soon, Rabobank warns that ongoing regional tensions and threats to energy flows mean the crisis remains unresolved. The market impact is medium, with sentiment leaning negative due to persistent geopolitical risks.