Looking to Sell the Jump in WTI Crude Oil Prices, as Iran-Oman Sign Pact
Global markets turned volatile as rising geopolitical tensions pushed oil sharply higher and triggered a pullback in risk assets.
Quick overview
- Global markets are experiencing volatility as rising geopolitical tensions lead to a sharp increase in oil prices.
- Equities are declining while WTI Crude Oil futures have surged over 10% due to concerns about supply disruptions.
- Recent comments from Donald Trump regarding potential military escalation have unsettled markets and raised doubts about a ceasefire.
- Despite some cautious optimism from Iran about managing traffic through the Strait of Hormuz, broader geopolitical risks continue to weigh heavily on market sentiment.
Live USOIL Chart
Global markets turned volatile as rising geopolitical tensions pushed oil sharply higher and triggered a pullback in risk assets.
Risk Assets Reverse as Oil Surges
Financial markets are reversing parts of the so-called “Trump trade,” with equities declining while oil prices surge sharply higher. WTI Crude Oil futures jumped as high as $114, reflecting growing concerns over supply disruptions and escalating geopolitical risks.
The shift marks a notable change in sentiment after a period of optimism earlier in the week, when investors were betting on de-escalation and a swift resolution to tensions in the Middle East.
Markets Reassess Trump’s Strategy
At the center of the uncertainty is Donald Trump and the question of whether the US will escalate military action or step back. For much of the week, markets had been pricing in a scenario where the US would declare victory and withdraw, leaving regional players to manage the aftermath. That outlook had supported equities while weighing on oil prices.
However, recent rhetoric has shifted expectations. Trump’s comments about potentially escalating military action against Iran have unsettled markets, raising doubts about the likelihood of a near-term ceasefire. This change in tone has been a key driver behind the sharp rebound in oil, which has surged by more than 10% in recent sessions.
Strait of Hormuz Remains a Critical Risk
A central concern for markets is the potential impact on energy infrastructure and the strategic Strait of Hormuz, a vital route for global oil shipments. Any disruption to this corridor could have significant implications for supply and pricing.
Recent reports of infrastructure damage within Iran have heightened fears of broader escalation. If Iranian oil facilities are targeted and retaliation spreads across the Gulf region, the resulting supply disruptions could take months to resolve, further supporting elevated oil prices.
Positive Signals from Iran Offer Limited Relief
Some reports have offered a degree of cautious optimism. According to Iranian state media, Iran has drafted a protocol with Oman to manage traffic through the Strait of Hormuz. Officials have framed the move as a logistical measure aimed at ensuring safe passage rather than a direct step toward de-escalation.
Additional details suggest the introduction of tolls for ships passing through the strait, which could help stabilize operations. However, markets remain skeptical, viewing these developments as insufficient to offset broader geopolitical risks.
Oil Surges as Supply Risks Rise
In contrast to the pullback in equities, oil prices rallied aggressively. West Texas Intermediate crude oil settled up $613, topping at $114.18 per barrel intraday, however they have cooled above $111 after the Iran-Oman news.
WTI Chart Daily – Opening Above Last Week’s High
WTI futures remain supported by the 20 SMA (gray) on the daily chart, but once we get the signal that the war on Iran is over, Oil prices will tank below $80. So, this jump looks like a good place to sell WTI futures, considering that they can’t rally much higher from here on.
Volatility Persists Ahead of Key Data
The backdrop is further complicated by a long weekend and the upcoming non-farm payrolls report, adding another layer of uncertainty for investors. Risk assets briefly attempted to recover, with the S&P 500 turning positive at one point, but quickly reversed and slipped back into negative territory.
Conclusion: Markets are increasingly sensitive to geopolitical headlines, with sentiment shifting rapidly between optimism and caution. While any signs of stability in key oil routes could ease pressure, the current environment remains highly volatile. For now, the balance of risks appears tilted toward further uncertainty, keeping oil elevated and limiting upside in equities.
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