By Christopher Tahir – Senior Market Strategist at Exness
Oil prices were higher today, extending a sharp multi-day rally. Escalating geopolitical tensions in the Middle East continue to drive price action. The threats and attacks on tankers caused significant disruptions to shipping traffic in the Strait of Hormuz, including halted deliveries, skyrocketing costs, and rerouting, translating into tangible supply concerns.
While the US announced that it would provide insurance and naval escorts for tankers transiting the Strait of Hormuz, the implementation could take time, leaving the market on the same trend to a certain extent.
Production constraints and infrastructure risks are compounding the bullish trend. Iraq has reportedly significantly reduced output in major fields, potentially removing roughly 1.5 million barrels per day from the market due to export bottlenecks and storage limitations.
Damage to facilities and uncertainty around operational continuity have reinforced fears of a sustained supply shock. As a result, the possibility of prolonged tensions could override earlier oversupply expectations.
Traders will also be watching today’s EIA weekly inventory report, following last week’s massive 16 million barrel build. However, the market could remain mainly driven by geopolitical headlines.