US-Iran War Fears Drive Oil Higher

0 62

The markets have been encouraged recently by positive progress in the US-China negotiations.

However, the unexpected outbreak of aggression between the US and Iran threatens to undermine risk appetite.

US-China Trade Developments Support Risk Appetite

President Trump announced last week that the two sides will officially sign the phase-one trade deal on January 15th.

Trump took to Twitter to add that he will travel to Beijing at a later date to meet with Xi Jinping. This is to initiate the second round of negotiations aimed at delivering the second phase of the trade deal.

Over the weekend, Chinese media reported that a delegation of Chinese officials will travel to Washington on January 13th to sign off on the deal.

There is speculation that Trump will use this initial meeting to lay some of the groundwork for the second round of negotiations.

Market Hopeful For Second Round of Trade Talks

However, there are some reservations over how quickly the market can expect this second round to move.

The issues to be covered by the next round of talks pose great challenges for both sides. This is especially true given the disputes in the past over issues such as the Chinese theft of US intellectual property and the opening up of access to the Chinese capital markets.

However, for now, both sides seem committed to further talks. As a result, the market remains encouraged.

US-Iran Tensions Flare

Away from the trade negotiations, however, other developments have not been so positive.

The US recently accused Iran of being behind an attack on the US embassy in Iraq last week. Since then, the US has responded with force by killing the top Iranian commander in a drone strike in Baghdad.

This development sparked a wave of risk aversion across global markets. This is because the threat of war between the US and Iran has ratcheted higher.

Iran has vowed to take revenge on the US. The US, on the other hand, has said it will act pre-emptively to defend itself against any further aggression from Iran.

Over the weekend, Iraq voted to dispel US troops from the area given the risk of further violence between Iranian militia and US troops.

Waiting Game

Oil prices rocketed higher in response to news of the US assassination. Many market commentators are warning that oil prices could move north of $100 per barrel in the event of war.

For now, the world waits to see if and how Iran retaliates

Technical Perspective

wti

Crude oil continued to push higher. Price has now broken firmly above the recent 60 level and is now challenging the 2019 highs of 63.12. Above here, the next level to watch is the 66.65 level. There, we also have the top of the bullish channel. To the downside, the 60 level remains key support, with the rising channel low coming in beneath.

TradingOil

START TRADING

or practice on DEMO ACCOUNT

Trading CFDs Involves high risk of loss

Leave A Reply

Your email address will not be published.