Oil prices volatile due to geopolitical instability

Oil prices experienced high volatility on Tuesday, with WTI price surging to $68.6 per barrel in early trading but paring gains later in the day, plummeting to $66.8 per barrel. If oil prices retreat, they may encounter support near $65.2 per barrel, while resistance may be found near $68.7 per barrel.

Oil prices have been volatile this week due to political instability. Hostilities in the Gaza area were resumed this week, breaking the ceasefire deal between Israel and Hamas. Israel launched an airstrike in the Gaza area, killing more than 400 people and breaking the ceasefire deal. The Israeli government threatened that there was more to come, shuttering the peace in the region and boosting oil prices upward early on Tuesday. In addition, US strikes over the weekend on Iran-backed Houthis militants that have been attacking commercial vessels in the Red Sea, propelled oil prices higher. On the other hand, Russian President Vladimir Putin agreed to pause attacks on Ukraine’s energy infrastructure for 30 days causing oil prices to plummet late on Tuesday.  

Trump has been using threats of imposing trade tariffs as a negotiation tool to further his agenda with other countries. Trump has threatened to impose reciprocal tariffs on many countries, which would raise US import taxes to match those imposed by the country’s other trading partners.

Trump’s tariffs may spark global trade wars and are causing turmoil in markets. Trump has threatened to impose heavy tariffs on Canadian products, including energy products. The threat of tariffs on Canadian energy products, which are Canada’s main exports to the US, is boosting oil prices.  

Oil prices are kept in check by high central banks’ interest rates. The US Federal Reserve held interest rates steady at its January meeting after delivering three consecutive rate cuts in 2024. FOMC policymakers voted unanimously to maintain the federal funds range to a target range of 4.25% to 4.50%. 

Fed rate cut expectations rose after the release of the US inflation report last week. The Fed, however, is widely expected to keep interest rates steady at this week’s policy meeting on the 19th. Markets are pricing in two more rate cuts this year, with the first rate cut in June, while a third rate cut is also considered possible. This week markets will focus on the Fed’s ‘dot plot’, which is a summary of the central bank’s economic projections and reflects the Fed rate outlook.

TRADE WTI

The content provided in this material and/or any other material that this content is referred to, whether it comes from a third party or not, is for information purposes only and shall not be considered as a recommendation and/or investment advice and/or investment research and/or suggestions for performing any actions with financial products or instruments, or to participate in any particular trading strategy and cannot guarantee any profits. Past performance does not constitute a reliable indicator of future results. TopFX does not represent that the material provided here is accurate, current, or complete and therefore shouldn't be relied upon as such. This material does not take into account the reader's financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of TopFX, no reproduction or redistribution of the information provided herein is permitted.

Written by:
Myrsini Giannouli

Share the article: