WTI struggles to regain $87.50 as Democrats push to end Iran war following midterm sweep

• WTI faces selling pressure for a second consecutive day as hopes grow for an end to the Iran war.
• A geopolitical risk premium persists as the US and Iran remain at odds over the Strait of Hormuz.
• Continued selling of the USD could lend additional support to oil prices, calling for caution among bears.

Trading just below the mid-$87.00s in Thursday’s Asian session, West Texas Intermediate (WTI), the US crude oil benchmark, remains under pressure for a second consecutive day. Prices are holding close to the near one-month low recorded the previous day.

Following sweeping victories in the US midterm elections that secured control of both chambers of Congress, Democratic leaders pledged on Wednesday to seek an end to the Iran war. Chuck Schumer, the top Senate Democrat, indicated that his party could leverage its control over government funding to pursue that objective. Traders consequently priced out the geopolitical risk premium, putting downward pressure on crude oil prices.

Energy markets nevertheless remain focused on the Strait of Hormuz, where shipping disruptions could restrict global supplies. Iran described the US response to its conditions for reopening the strategic waterway as unsatisfactory. Concerns over the safety of regional shipments were heightened further after another oil tanker was struck off Oman’s coast near the Strait of Hormuz.

Persistent selling pressure on the US Dollar (USD) could also provide support for oil, which is denominated in the currency. It would therefore be prudent to await strong follow-through selling before concluding that crude prices have peaked and positioning for further declines. Such a move would extend the recent sharp retreat from the 104.00 mark reached last Friday, the highest level since May.

WTI price action on the daily chart

Crude Oil Maintains a Constructive Technical Bias

As long as crude oil prices hold above the 100-day Simple Moving Average (SMA) at $86.11 and the 50.0% Fibonacci retracement of the latest advance at $85.59, the technical outlook remains constructive. This support confluence suggests underlying buying interest on dips following the recent retreat from multi-month highs.

Should this support give way, attention would turn to the 61.8% retracement at $81.27 and the 78.6% level at $75.12. Further below, the previous swing-low area at $67.29 provides a more distant floor. On the upside, the first resistance lies at the 38.2% Fibonacci retracement at $89.91. Beyond that are the 23.6% level at $95.25 and the recent cycle-high area at $103.89.

(The technical analysis of this story was written with the help of an AI tool. Know more.)