Just weeks ago, the trading market was betting on peace in the Middle East, but now it's predicting war is imminent. This reversal of expectations fully illustrates how fragile the current peace in the Middle East is. Brent crude oil prices surged to $86 a barrel, a near one-month high, as the ceasefire agreement between the US and Iran effectively collapsed. This followed a US attack on Iranian defense facilities, an Iranian missile strike on a UAE oil tanker, and the US reinstating its naval blockade of Iranian ports. In addition, yesterday's release of the US June Consumer Price Index (CPI) weakened the dollar's upward momentum, benefiting dollar-denominated commodities. Overall inflation fell to 3.5% year-on-year, far below the market expectation of 3.8%, mainly due to a sharp drop in energy prices in June. However, this data only reflects past performance and does not indicate a downward trend in inflation: it merely reflects the depressed oil prices in June before the ceasefire broke down. Technical Analysis (Brent crude oil daily chart source: EasyForex) After repeatedly encountering resistance at the psychological level of $110 in May, Brent crude oil entered a clear downtrend: both highs and lows continued to move lower, and the downtrend line remained valid for nearly two months. Bullish rallies...
After bottoming out near $70 in early July, oil prices reversed course, driven by renewed tensions in the Middle East, with both highs and lows rising. Oil prices broke through the downtrend line and completed a pullback confirmation, then stabilized above the 200-period exponential moving average (EMA) and retested support, validating the upward logic. Currently, two uptrend lines are providing support, and the price has reached the key level of $85, which has now become resistance. If the price effectively breaks through $85, it will further rise to the $90-$92 range. Downside Scenario Conversely, if oil prices fall back after encountering resistance at $85, Brent crude will return to the $70-$80 trading range it has been in for the past month. A break below the short-term uptrend line and the 200-period EMA would signify a collapse in buying power, and the price would test the lower end of the range. Brent crude is now at a crossroads: on the one hand, the Middle East geopolitical conflict remains unresolved, and on the other hand, technical patterns are signaling strength. Whether this rebound is a trend reversal or a temporary bull trap within a trading range depends on the choices made by both sides: either the US and Iran will make concessions, or the bulls and bears will determine a winner at the $85 mark. Regardless of the outcome, oil price movements will dominate the energy market landscape throughout the summer.