Oil prices have experienced significant volatility due to renewed geopolitical tensions involving the United States, Saudi Arabia, and Iran-backed military groups in Iraq. According to UOB strategists, oil prices initially dropped sharply as the US military campaign against Iran remained paused, with West Texas Intermediate (WTI) falling 4.1% to USD 79.26 per barrel and Brent crude declining 4.8% to USD 84.10 per barrel, marking their lowest levels since July 16 [1]. However, WTI rebounded as much as 5% above USD 83 following fresh fighting and news of a US interception of an Iranian attempted surprise attack, highlighting the heightened volatility driven by Middle East risks [1].
Source 2 reports that WTI futures on NYMEX traded 3.2% higher at around $81.00 during the early European trading session on Wednesday, as joint attacks by US CENTCOM and Saudi Arabia on Iran-backed groups in Iraq renewed fears of a prolonged global energy supply disruption [2]. The Saudi Ministry of Defence confirmed targeted strikes against Iran-aligned armed groups in Iraq, coordinated with US CENTCOM, in retaliation for planned attacks on US forces and Saudi oil facilities [2]. Additionally, subdued traffic near the Strait of Hormuz—a passage for nearly 20% of global energy supply—suggests ongoing supply concerns, as oil tankers avoid the route due to Iranian attacks [2]. The Iranian Islamic Revolutionary Guard Corps (IRGC) stated that three oil tankers were 'struck and stopped' after ignoring warnings in the Hormuz [2].
Market attention is also shifting to the upcoming Federal Reserve (Fed) monetary policy decision. According to UOB, the recent rebound in crude prices has led markets to price in a 35.8% probability of a 25bp rate hike at the July FOMC meeting [1]. However, Source 2 cites the CME FedWatch tool, which shows traders see a 69.5% chance that the Fed will leave interest rates unchanged in the range of 3.50%-3.75% [2]. This discrepancy highlights differing market expectations regarding US monetary policy.
Technical analysis from Source 2 indicates WTI trades higher at around $80.93, striving to return above the 20-day Exponential Moving Average (EMA) at $80.37. The 14-day Relative Strength Index (RSI) near 51 points to neutral-to-positive momentum, suggesting the rebound could extend if prices remain above the short-term EMA. Immediate support is at the July 28 low of $77.16, with resistance at the July 27 high of $84.58. The odds of WTI revisiting the 50-day high at $92.25 would strengthen if recovery continues above $84.58 [2].
CONCLUSION
Renewed US-Saudi military action against Iran-backed groups and ongoing tensions in the Strait of Hormuz have driven a sharp rebound in oil prices, reversing earlier declines. The market remains highly sensitive to geopolitical developments and supply disruptions, with technical indicators suggesting potential for further price gains if resistance levels are breached. Uncertainty around the Federal Reserve's rate decision adds another layer of volatility to the outlook.