Oil prices boosted by geopolitical concerns

Oil prices were volatile on Monday, with WTI price surging above $68.0 per barrel in early trading but paring gains later in the day, dropping to $67.3 per barrel. If oil prices retreat, they may encounter support near $65.2 per barrel, while resistance may be found near $71.2 per barrel.

Oil prices spiked early on Monday after US strikes over the weekend on Iran-backed Houthis militants that have been attacking commercial vessels in the Red Sea. Concerns that the crisis might escalate, propelled oil prices higher. Oil prices pared gains later in the day, however, on reduced global economic outlook. 

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 issuing 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 currently pricing in three rate cuts in 2025, with the first rate cut in June, compared to just two rate cuts the week before.

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Written by:
Myrsini Giannouli

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