West Texas Intermediate (WTI), the benchmark for US crude oil, surged past the $72.00 mark during early Asian trading hours on Friday, reaching $72.05, marking a sharp 6.20% gain in just one day. 

This rally reflects intensifying geopolitical tensions in the Middle East, which are stoking investor concerns about potential disruptions in global oil supply. This piece by Gradiopexo clarifies the complexities of the subject with a methodical approach.

This jump represents WTI’s highest level since February, driven largely by a dramatic escalation in the Israel-Iran conflict. On Thursday evening, Israel launched airstrikes targeting Iranian nuclear sites, with Defense Minister Israel Katz calling the move a “preemptive strike.”

Prime Minister Benjamin Netanyahu added further weight to the conflict, announcing Israel had struck at the core of Iran’s nuclear enrichment and weaponization infrastructure, particularly at the sensitive Natanz facility, a symbol of Tehran’s controversial nuclear ambitions.

Geopolitical Premium Back in Focus

The Middle East remains a strategic epicenter for the global energy market, accounting for roughly one-third of worldwide crude oil production. Any significant instability in the region sends ripples through energy markets globally, triggering supply-side risk pricing.

These developments have refocused the market on the concept of a geopolitical risk premium, the portion of the oil price that reflects the potential for supply shocks or infrastructure damage. 

Whenever conflict escalates in oil-rich regions like the Persian Gulf, traders begin hedging against worst-case scenarios, such as the closure of the Strait of Hormuz, a key chokepoint for global crude flows.

The Supply-Demand Balance and Trader Sentiment

While the physical supply of oil has not yet been affected, market psychology plays a pivotal role in price movements. Futures traders, anticipating higher risks, are bidding up prices in response to uncertainty. This occurs despite a relatively stable fundamental supply-demand balance, underscoring the importance of perception-driven volatility in oil markets.

Moreover, refiners and importers tend to accelerate purchases when conflict zones threaten future deliveries, further tightening short-term market availability. This behavior amplifies price spikes as observed in Friday’s session.

Political Uncertainty from the United States

Despite the bullish momentum, not all signals are supportive of sustained WTI gains. One prominent downside risk stems from US domestic political policy, particularly the return of tariff threats from the US President. He declared that the US-China trade deal is “done,” yet the absence of confirmation from Beijing injects doubt into the outlook.

Complicating matters, the US President plans to send tariff notifications to dozens of US trade partners in the coming weeks, a move that could reinvigorate trade tensions and derail global economic recovery. His administration is reportedly moving toward unilateral tariff enforcement ahead of a key July 9 deadline, stemming from a 90-day policy pause.

Tariff escalation could dent global oil demand, especially if China, the world’s second-largest economy and a major crude importer, retaliates. Trade frictions tend to cast a shadow over industrial output, consumer confidence, and cross-border investment flows, all of which are crucial demand-side drivers for crude oil.

Technical Perspective and Price Outlook

From a technical analysis standpoint, WTI’s breakout above $72.00 breaches a significant resistance level, signaling possible continuation toward $74.00 or even $76.50 if geopolitical risks intensify. The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) on the daily chart now indicate bullish momentum, although overbought conditions could lead to profit-taking pullbacks.

Still, support lies at $70.00, and if the price holds above that threshold, it would reinforce short-term bullish sentiment. However, a breakdown below this level, particularly if triggered by negative macroeconomic data or de-escalation in the Middle East, could open the path toward $68.00 or lower.

Conclusion: A Volatile Road Ahead

WTI’s sharp rise to $72.05 is a vivid reminder of how quickly geopolitical shocks can reshape the commodity landscape. While the Israel-Iran conflict adds a powerful upward thrust to prices via risk premiums, opposing forces such as tariff fears, trade instability, and economic data uncertainty may limit further gains.

Investors and analysts will be watching closely for new headlines from both the Middle East frontlines and Washington’s trade policy developments, as each could significantly sway oil market direction in the coming days. In this complex backdrop, traders are urged to remain cautious, keeping a close eye on both technical indicators and geopolitical risk variables.