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The US Sends A Further 1000 Troops To Middle East

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US Reacts to “Hostile Behaviour”

Risk sentiment has been a little softer so far this week as rising geopolitical tensions in the Middle East have taken the shine off the recent rally.

The US announced that it will send a further 1000 troops to the Middle East. This is in light of the growing stand-off with Iran. Acting US Defence secretary Patrick Shanahan said that the move was in direct response to “hostile behavior” by Iran.

In a statement, Shanahan said:

“The recent Iranian attacks validate the reliable, credible intelligence we have received on hostile behavior by Iranian forces and their proxy groups that threaten United States personnel and interests across the region”.

Saudi Oil Tanker Attacks

The US accused Iran of being responsible for attacks on Saudi Arabian oil tankers over the last week. The attacks saw two tankers being set on fire via a missile device. While Tehran has officially denied the attacks, the US has released footage of the Iranian Revolutionary Guard removing an unexploded mine from one of the oil tankers in the Strait of Hormuz.

This attack comes only a month after four Saudi Arabian oil tankers reported being attacked. The US responded at the time by deploying warships to the Middle East.

The US has now backed up this effort by deploying 1000 troops which have been authorized to “address air, naval, and ground-based threats in the Middle East”.

However, the statement was keen to stress that the “United States does not seek conflict with Iran.” It went on to state that it only wishes to  “ensure the safety and welfare of […] military personnel working throughout the region to protect […] national interests”.

Nuclear Deal Breaks Down

Tensions between the US and Iran have been growing worse following the breakdown of the 2015 nuclear deal. Iran recently announced that as of June 27th, it will breach the limits on its stockpile of enriched uranium as set by the 2015 agreement.

A statement from the country’s atomic agency said that Iran has now quadrupled its production of nuclear material. However, it did say there was “still time” for Iran to scale operations back. This is under the condition that European countries act to protect Iran from the recently reinstated US sanctions which have banned the sale of Iranian oil.

“Nuclear Extortion”

A US spokeswoman for the state department told reporters:

“This is a pattern of 40 years of behavior, it’s consistent with how the Iranian regime behaves… We would say to the international community that we should not yield to nuclear extortion by the Iranian regime.”

While the US continues to reaffirm that it does not want a war with Iran, the situation is becoming incredibly hostile. With extra US troops in the area, unless aggression linked to Iranian forces stops, a conflict on the ground looks likely.

Oil Market Not Bothered Yet

Surprisingly, oil traders appear to be downplaying the situation for now. Crude prices continue to hover near recent lows. The market focus, for now, it seems, is on soaring US crude production. This once again recently broke out to fresh record highs and shows no signs of slowing down.

Technical Perspective

The recent sell-off in oil has seen prices cascading all the way down to the 61.8% retracement from last year’s lows, which has held as support for now.

However, the tone remains heavy. Should we break down below this level, the next key support is down at the 47.49 level where we have the 78.6% retracement as well as some structural support. To the topside, the retest of the broken 50% level has held as resistance for now. The 57.16 level is the next key zone to watch above there.

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