Oil Prices Plunge Sharply: Market Reassesses Middle East Supply Shock

Summary:

As market concerns over “catastrophic supply disruptions” gradually ease, crude oil prices are returning to rationality from extreme volatility. Although geopolitical risks persist, market pricing logic is shifting from a “supply vacuum” to a “manageable conflict.” Against this backdrop, oil prices may remain elevated in the short term, but there remains room for a pullback in the medium to long term.

SELL WTI

Close Time

CLOSED

86.337

Entry Price

73.000

95.000

96.299 +1.325 +1.40%

866.3

Pips

Loss

73.000

95.005

Exit Price

86.337

Entry Price

95.000

Fundamentals

International oil prices have recently experienced sharp fluctuations. WTI crude oil surged to nearly US$120 per barrel before rapidly retreating to around US$85, indicating that the market is reassessing the actual impact of the Middle East conflict on global supply.

The recent sharp rise in oil prices primarily reflects market concerns over a potential prolonged blockade of the Strait of Hormuz. As one of the world's most critical energy transport routes, the strait handles approximately one-fifth of global oil trade. Should a long-term blockade occur, it would severely disrupt global energy supplies.

However, as the situation evolves, market expectations for the “worst-case scenario” are cooling. Investors are gradually shifting their pricing logic from a “catastrophic supply vacuum” to a “manageable conflict” framework. In other words, while geopolitical friction persists, the market widely believes that the oil supply system will not be completely disrupted and that global supply chains will remain operational under pressure.

Meanwhile, the U.S. Energy Information Administration (EIA) noted in its latest monthly report that oil prices would remain supported in the short term should conflicts in the Middle East cause temporary supply disruptions. The EIA projects that Brent crude prices may stay above US$95 per barrel over the next two months. However, as markets gradually adjust to the new supply landscape, oil prices are expected to gradually retreat to around US$70 per barrel by year-end.

The EIA also noted in its Short-Term Energy Outlook that the current shipping restrictions in the Strait of Hormuz, a critical energy corridor, may exert pressure on Middle East production in the coming weeks, thereby providing temporary support for oil prices.

Oil Prices Plunge Sharply: Market Reassesses Middle East Supply Shock_1

Technical Analysis

From a technical perspective, oil prices have entered a phase of high volatility following a sharp short-term rally. During Tuesday's trading session, prices briefly dipped to US$81.23 before rebounding swiftly, indicating sustained buying support at lower levels. Currently, prices are oscillating within the US$85–US$90 range, signaling a period of consolidation. Given the extreme volatility observed earlier, even this range-bound movement exhibits significant price swings.

Under the current market structure, the market is more likely to enter a high-volatility range-bound trading phase. Strategically, consider reducing positions or shorting near the US$90 level, while looking for buying opportunities in the US$73–US$80 range.

Trading Recommendations

Trading Direction: Sell

Entry Price: 89.00

Target Price: 73.00

Stop Loss: 95.00

Valid Until: April 10, 2026 23:55:00

Support: 82.99, 79.72, 78.68

Resistance: 87.45, 88.76, 89.59

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