West Texas Intermediate (WTI) Oil extended its decline on Tuesday, trading around $77.90 and down nearly 4% on the day, following a sharp 9% drop the previous day. This selloff was triggered by a pause in attacks between the United States and Iran, which raised hopes that security risks around the Strait of Hormuz could ease and prompted traders to unwind part of the geopolitical premium built into oil prices [1][2]. ING analysts Warren Patterson and Ewa Manthey noted that Brent also sold off sharply as US–Iran strikes paused and President Trump signaled a 'good chance' of a deal, though he warned that strikes would resume if no agreement was reached [2]. President Trump stated it was a 'good time for Iran to make a deal,' but cautioned that the US would 'go back and finish the job' if negotiations failed [1][2]. Oman presented Iran with a proposal for joint management of the Strait of Hormuz through 'voluntary fees,' under which Tehran would not exercise sole control over the key shipping route [1]. Despite these diplomatic efforts, both sources highlight that persistent geopolitical risks mean oil is likely to retain a significant risk premium, and the pullback could prove short-lived [1][2]. ING analysts stressed that flows through the Strait of Hormuz and Bab el-Mandeb, as well as Black Sea exports, remain critical, and a sustained move lower in prices would require a recovery in flows through the strait. They also noted that oil loadings at both the CPC terminal and the Sheskharis terminal in Russia have resumed, which could add downward pressure on the market [2]. From a technical perspective, WTI has failed to hold above the 100-day Simple Moving Average (SMA) at $88.19 and has slipped below the 50-day SMA at $81.26, indicating a bearish near-term bias. The 200-day SMA at $74.78 provides key support, and a decisive daily close below this level could open the door to a deeper decline toward the pre-war region of $67-$65 [1]. Momentum indicators are mixed, with the Relative Strength Index (RSI) below the neutral 50 level and the MACD still positive but losing altitude, hinting at waning upside pressure [1]. ING analysts cautioned that even in the event of a deal, the market will likely continue to price in a large risk premium, given how quickly agreements can unravel [2].
CONCLUSION
WTI oil prices have dropped sharply amid easing US-Iran tensions and renewed hopes for a deal, but both technical and geopolitical factors suggest continued volatility. Analysts emphasize that persistent risks and fragile flows through key shipping routes will keep a significant risk premium embedded in oil prices. The market remains highly sensitive to developments in negotiations and oil flows, with further downside possible if technical support levels are breached.