Oil Oversold? Middle East Risks Remain

Oil Oversold? Middle East Risks Remain

Oil prices are cooling off as concerns over the nature and scale of Israel’s retaliation to Iran become known. Israeli Prime Minister Benjamin Netanyahu has indicated to the Biden administration that they will be targeting military rather than oil nor nuclear facilities.

Israel could be keeping oil-related targets as a last resort, depending on how Iran responds to any military strikes.

Iran accounts for around 4% of global oil production. However, Iran’s production isn’t the only worry. Broader concerns over regional stability, particularly involving the Strait of Hormuz, should continue to weigh heavily on energy markets. Roughly 20% of the world’s oil, and 20% of liquefied natural gas (LNG), passes through the strait that is bordered by Iran, the United Arab Emirates, and Oman.

If the price fails to hold the $70 support, WTI could slide toward the next support zone of at $66.90, the low from October, and $65.50, a level not seen since September.