After hitting a multi-week high on Wednesday, Brent crude prices have extended the correction that began on Thursday and are currently trading just above $75 a barrel. Fears that the United States and Iran could slide back into all-out war, a scenario that could lead to a prolonged closure of the Strait of Hormuz, have eased. After the US President announced the end of the memorandum of understanding on Wednesday, both parties have signalled a constructive approach. Despite the continuation of military exchanges between the two sides, traders remain hopeful that the hostilities will be short-lived, allowing maritime traffic through the Strait to stabilize. However, prices are unlikely to fall significantly from current levels while both sides remain actively engaged in conflict. Against this backdrop, oil traders will continue to focus on the progress of diplomatic talks and developments on the ground, and are likely to react swiftly to any new developments, a dynamic that could keep volatility elevated.
Ricardo Evangelista, ActivTrades
Source: ActivTrader
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