Crude oil prices extended the decline, reaching the lowest level since September, as investors digested the impact of the US midterm elections. Brent, the global benchmark, dropped to $94, down by 20% from its highest point this year. This retreat may continue as investors watch for Donald Trump’s next move on Iran.
Crude oil price falls as investors assess Trump’s next move
For months, Trump has been saying that the Iran war will end after the midterm elections. Now, the elections have ended, and the president is still stuck in the highly unpopular war, without any good options.
His first option is to negotiate a deal with Iran. However, that will be a tough one since Iran has already refused to give Trump concessions. Also, Iranian officials have already seen his humiliation in the midterm and will play hardball.
The other option is launching strikes against Iran in his bid to force officials to a deal. However, Trump has already launched several strikes this year, including in the first 40 days of the war, with officials refusing to offer a deal. Also, Iran has maintained that it will strike Gulf countries, including Israel if attacked.
Trump can also decide to cave in to Iranian demands and go back to the Memorandum of Understanding (MoU). This option will be a difficult one because, as Professor John Mearsheimer says, the MoU was a “surrender document.” Such a move will see Trump lose the only support he has among the neocons.
Meanwhile, Trump can decide to maintain the status quo, where he increases the economic pressure on Iran and keeps the blockade. This one has several risks as well. For example, it means that attacks against ships will continue. Also, the blockade is highly expensive and Democrats may decide to cut off funding when the new term starts.
Sensing Trump’s humiliation, Iran may decide to launch preemptive new strikes against US forces and allies in the region. Such a move will lead to higher oil prices as Trump will use that attack to restart his war.
Brent crude oil price technical analysis
Oil price chart | Source: TradingView
The daily chart shows that Brent has been in a strong sell-off in the past few days. After soaring to $117 in October, it has plummeted to the current $14. It has dropped to the 50% Fibonacci Retracement level.
Oil has moved below the Major S/R pivot point of the Murrey Math Lines level of $100. The Relative Strength Index (RSI) and the MACD indicator have continued to fall. It has also moved below the Supertrend indicator.
Therefore, the price may continue falling as sellers target the 61.8% Fibonacci Retracement level of $88. A move above the resistance level of $100 will invalidate the bearish outlook.
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