TradingKey – The continuous escalation of the US-Iran conflict has driven a unilateral rally in oil prices, with WTI crude oil futures returning to $90 and Brent crude oil futures returning to $100, both major benchmarks reclaiming their early-June highs.
The market’s focus is gradually shifting from the geopolitical conflict itself to expectations regarding its duration, a variable that is becoming a key factor influencing the direction of oil prices.
According to the latest estimates released by JPMorgan’s Global Commodities Research team, if the Middle East conflict lasts for one month, the monthly average price of Brent crude is expected to remain around $94/barrel; if it extends to three months, the monthly average price could rise to $114/barrel. The institution noted that for every additional month of supply disruptions, the monthly average Brent price could rise by $7 to $8/barrel. Meanwhile, the US fuel market will also face pressure; if risks escalate further, the national average gasoline price could once again break above $4.50/gallon.
The institution believes that although weak demand and the activation of alternative shipping routes have cushioned the supply deficit to some extent, simultaneous pressure on the Strait of Hormuz and Red Sea shipping routes is narrowing the market’s buffer room for adjustment, making potential upside risks to prices impossible to ignore.
During this rally, Brent crude soared from its low of $70.14 on July 3 to an interim high of $102 on July 23, representing a cumulative gain of up to 45.4%. This upward momentum was significantly stronger than that of WTI during the same period (which rose 39.5%). As the global oil benchmark, Brent refreshed its interim highs multiple times in July, with bullish sentiment peaking at one point.
Brent crude oil futures two-hour candlestick chart, Source: TradingView
However, after touching $102, the bulls clearly slowed their offensive momentum—prices failed to take advantage of the momentum to break above $105, instead consolidating within a narrow range of $97-$100. Judging from the current trend, Brent’s ascending channel remains intact, and the bullish alignment structure has not been disrupted, but the pullback from the high indicates that overhead selling pressure is indeed real.
In terms of upside potential, if the bulls want to resume the rally, the first line of resistance is to break through the 5-day ($98.26), 10-day ($97.76), and 20-day moving averages ($97.64). These three short-term moving averages are tightly intertwined within a narrow range, forming the first short-term resistance level. If a breakout is successfully sustained, attention should then be paid to the $100 psychological level and the interim high of $102.
If the interim high ($102) is successfully breached, according to Fibonacci extension calculations, the first target is projected at $105 (an extension of the previous high), and the second target at $110 (a round number and psychological level), representing a potential upside of approximately 3% to 8%.
In terms of downside potential, the most noteworthy key support level is the 0.236 Fibonacci level ($94.48), which coincides with the 50-day moving average ($95.58), making this support much stronger than a typical single support level; if it is decisively broken, a medium-term correction will be officially established. Regarding downside estimates, if the 0.236 Fibonacci level ($94.48) is decisively breached, the next meaningful support level to halt the decline would be the 0.382 Fibonacci level ($89.83), representing a potential downside of approximately 7.5%.
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