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Crude Oil Price Analysis: Iran Strikes Back, What Next from President Trump?

Crude Oil Price Analysis: Iran Strikes Back, What Next from President Trump?

2020-01-08 10:35:00
Justin McQueen, Analyst
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Crude Oil Analysis & News

  • Iran Strikes Back
  • Markets Await President Trump’s Response
Oil - US Crude BEARISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 24% -4% 13%
Weekly 61% -44% 0%
What does it mean for price action?
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Iran Strikes Back

Overnight, two US military bases in Iraq (Al-Asad and Erbil) had been attacked, in which the latest reports stated that a total of 15 ballistic had been fired. As it stands, there have been no reported US casualties, however, Iranian State TV have suggested that 80 Americans were killed in the attack, therefore making the damage thus far somewhat unclear. The Iranian Revolutionary Guard had claimed responsibility for the attack, while also threatening further action should the US retaliate.

Markets Await President Trump’s Response

President Trump had been quick to respond to the Iranian attacks, tweeting that “all is well” while the initial outlook of the current assessment of casualties and damages had been “so far, so good”. Consequently, with this notable escalation in tensions between the US and Iran, all eyes will be on how the US will respond with President Trump set to deliver a speech later today. While no time has been given as of yet, the President is reportedly set to be given an intelligence brief at circa 19:15GMT.

Initial Reaction to Iranian Attacks

In the immediate aftermath to the Iranian attacks, Brent crude futures had spiked as much as 4% to highs of $71.75/bbl, while safe-haven flows took gold prices to the highest level since April 2013 having broken above $1600. However, the initial move had been largely pared following President Trump’s somewhat optimistic assessment. Alongside this, oil prices eased on the back of comments from OPEC Secretary General Barkindo, who noted that OPEC had as much as 3-3.5mlm barrels of spare capacity to counteract any supply disruption.

What Happens Next?

The initial focus will be on how the US will respond to the latest attacks. As a reminder, President Trump stated on the weekend that if Iran strikes back, they could open an attack on 52 Iranian sites. However, should the US hold back on escalating geopolitical tensions further, concerns may begin to ease, given that the Iranian Foreign Minister had noted that the country have taken proportionate measures in self-defence, which in turn may begin to see oil prices pullback from its elevated levels.

Strait of Hormuz: the world’s most important oil chokepoint

Crude Oil Price Chart: Daily Time Frame (Aug 2019 Jan 2019)

Crude Oil Price Analysis: Iran Strikes Back, What Next from President Trump?

On the technical front, near term support is situated at $67.50, which marks the 76.4% Fibonacci retracement. Should the US go against escalating tensions further, crude oil prices could see a push towards the $65.00 handle. However, for the time being risks remain tilted towards upside spikes.

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

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