Oil markets experienced significant volatility as the US military announced a total blockade of the Strait of Hormuz on Tuesday, a critical chokepoint for global oil supply. This announcement led to a sharp rebound in West Texas Intermediate (WTI) oil prices, which climbed approximately $4 during the Asian session to reach near $89.00, recovering from earlier losses that saw prices drop to a three-week low of $84.86. The recent decline, nearly 8% over two days, was attributed to rumors of renewed US-Iran contacts aimed at resuming peace talks, with US President Trump confirming that negotiations might restart within the next two days [1].
Technical analysis indicates that WTI remains in a bearish bias within a broader horizontal channel, with support around $84.50 holding for now. Key technical indicators such as the Relative Strength Index (RSI) remain below 50, and the Moving Average Convergence Divergence (MACD) shows weak momentum. A break below $84.46 could trigger a deeper correction toward $80.00 and potentially $76.00, while resistance levels are noted at $98.10, $106.28, and $113.16 [1].
Meanwhile, Brent oil prices dropped nearly 5%, reversing Monday’s gains, as hopes for a second round of US–Iran negotiations and warnings from the International Energy Agency (IEA) about demand destruction weighed on the market. Despite the recent drop, Brent remains up 31% since the start of the war and 56% year-to-date. The IEA warned that the ongoing conflict could eliminate global oil demand growth for the first time since 2020. The International Monetary Fund (IMF) projects Brent to average $82 in 2026 under its baseline scenario, assuming a short-lived conflict and normalization of prices in the second half of 2026. However, in an adverse scenario where the conflict persists, the IMF envisions Brent at $100 and weaker global growth [2].
The market is currently balancing the supply shock from the US blockade of Hormuz and the potential for resumed US-Iran negotiations, against the backdrop of demand risks highlighted by the IEA and IMF. This has resulted in heightened volatility and uncertainty regarding the future direction of oil prices.
CONCLUSION
The US blockade of the Strait of Hormuz has triggered a sharp rebound in oil prices, but ongoing demand risks and the prospect of renewed US-Iran talks are tempering market sentiment. While technicals suggest further downside risk for WTI, the outlook for Brent remains highly dependent on the duration of the conflict and global demand trends. Market participants face elevated uncertainty as supply disruptions and demand destruction continue to compete for dominance.