Key Events
- Trump grants Iranian oil option to China
- Crude oil drops back to pre-Iran–Israel war escalation levels near $65/barrel
- China is expected to navigate its decisions in line with national interests
As the world’s largest oil importer, China’s sourcing decisions carry global consequences. Trump’s suggestion appears to be a geopolitical chess move: facilitating a de-escalation between Iran and Israel, potentially reducing risks near the Strait of Hormuz, while also leveraging U.S.–China trade dynamics, particularly regarding tariffs and broader economic cooperation.
Sanctions on Iranian oil remain in place under U.S. law, but that hasn’t stopped Chinese refiners from sourcing barrels through shadow fleets—bringing along legal exposure and quality risks.
Two main paths are being considered:
- If China leans toward U.S. oil: This could help stabilize relations between the world’s two biggest economies, support global trade, and lift overall economic momentum—offering a more bullish setup for crude prices.
- If China favors Iranian oil and bypasses U.S. imports: This could further strain U.S.–China relations, revive trade tensions, and weigh on broader economic sentiment. In such a scenario, oil demand may soften amid weaker macroeconomic expectations. While Iranian barrels are likely to continue reaching China through unofficial channels, concerns over quality control and regulatory risks could impact both market sentiment and pricing.
Nonetheless, China is expected to make a decision that aligns with its national interests. From a technical standpoint, the key scenarios are as follows:
Crude Oil Outlook: 3-Day Time Frame – Log Scale
Source: Tradingview
From a 3-day time frame perspective, the ceasefire headlines coincided with a rejection from the upper boundary of a 3-year declining parallel channel, alongside a daily overbought RSI—last seen in January 2025. This combination pushed crude prices back toward the pre-war breakout zone near $65 per barrel.
Prices are currently holding at this notable support level, with momentum indicators sitting in neutral territory. If crude manages to resurface above $69 and $72, a breakout from the channel may take shape, opening the path toward resistance at $78, $80 and $83.50—levels that could define the next upside challenge.
On the downside, a sustained move below the $64.70 support could expose further downside toward $63.40 and $61.40, where rebound potential may re-emerge. However, a clean break below $60 would suggest a deeper correction is underway, which could pose renewed pressure on oil-producing countries.
Written by Razan Hilal, CMT
Follow on X: Rh_waves
