On Friday, we warned that trading on Monday could be volatile — but not to this extent! The situation sharply escalated over the weekend following a large-scale strike by Israel and the US on targets in Iran, during which the supreme leader Ali Khamenei was reportedly killed. In retaliation, Iran launched missiles and drones at Israel, Saudi Arabia, and other targets.

Although financial markets had priced in some escalation risks, they reacted very sensitively:
→ Gold (XAU/USD): the price surged above $5,400 per ounce.
→ US Dollar Index (DXY): the US currency strengthened, not only as a safe-haven asset but also amid expectations of a new wave of global inflation driven by higher fuel costs.
→ Equity indices: opened sharply lower. Airlines and the tech sector were hit hardest, while defence stocks rose against the broader market.
→ Oil: showed the most aggressive reaction, with WTI opening at a bullish gap of roughly 10% compared with Friday’s close.

Shipping in the Strait of Hormuz (through which around 20% of global oil supply passes) is effectively paralysed following attacks on tankers. As shown on the XTI/USD chart, barrel prices are fluctuating widely as traders attempt to determine a fair value under these extraordinary circumstances.

Technical Analysis of XTI/USD

Three days ago, we drew an ascending channel on the oil price chart, which has held up:
→ its upper boundary acted as resistance at Monday’s open;
→ its median pushed the price upwards.

Bearish perspective:
→ following the bullish gap, prices failed to continue higher and fell sharply;
→ the round level of $73 acted as resistance.

Bullish perspective:
→ the channel median previously acted as resistance but now serves as support;
→ the psychological level of $70 favours buyers.

It is reasonable to expect WTI oil to remain volatile within a broad $70–73 range, with price impulses largely driven by political statements regarding escalation in the Middle East.

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