Since the start of the new trading week, the price of WTI crude oil has fallen by more than 12%, currently hovering near $65 per barrel. For now, selling pressure remains firm, amid growing uncertainty surrounding the conflict between Iran and Israel, in which the United States has begun to play a key role.
What Has Happened in the Current Conflict?
The conflict between Israel and Iran began with Operation "Rising Lion" on June 13, when Israel bombed strategic sites, including nuclear facilities and military bases in Iran. Shortly after, Iran retaliated with missile strikes targeting cities like Tel Aviv and other strategic points.
Since then, both countries have exchanged continuous attacks without reaching a diplomatic agreement. Eventually, the United States, under the leadership of President Trump, intervened, blaming Iran for the escalation and declaring support for Israel.
Over the most recent weekend, Trump, seeing no signs of resolution, announced a 14-day window for a diplomatic solution. However, soon after, the U.S. launched a surprise military attack, named “Midnight Hammer”, between June 21–22, targeting three key nuclear sites in Iran. The attack triggered global criticism, and on June 23, Iran responded with a symbolic counterattack on U.S. bases in Qatar.
Just hours later, Trump publicly announced that a ceasefire had been reached, marking the end of what he called the “12-day war.” Still, the agreement appears fragile. Israel and Iran continue to accuse each other of violating the ceasefire, and both have begun preparing new retaliation plans, while Trump urges calm, the risk of renewed conflict remains high.
During the height of the conflict, WTI crude surged to $78, driven by fears of production disruptions if the war spread to key oil-producing regions. However, since June 23, prices have fallen sharply to $65, as the market anticipates a short-lived conflict with limited impact on oil infrastructure and no prolonged escalation. Additionally, Trump’s ceasefire remarks have temporarily calmed the markets.
Source: StoneX, Tradingview
Nevertheless, volatility has spiked. The ATR indicator shows that 14-day average price swings have reached $3.5 per day, a level not seen since December 2022, confirming a high-volatile environment that reinforces the lack of clear directional bias in WTI prices.
Is the U.S. Dollar Still a Safe Haven?
The DXY index, which measures the dollar’s strength against other major currencies, began to rebound following the outbreak of the conflict on June 13, rising toward the 100-point mark, signaling a return of the dollar as a safe haven amid rising tensions in the Middle East.
However, after the U.S. became directly involved, the index declined again, currently trading near 98 points, reflecting a renewed weakness over the past two trading sessions.
Source: Marketwatch
This suggests that, although the conflict generated volatility, it has not triggered a global risk-off shock strong enough to solidify the dollar’s role as a safe haven. Furthermore, the market appears to disapprove of the U.S.’s direct intervention, which has contributed to a short-term loss of confidence in the dollar. Despite this, the dollar’s weakness has not halted the ongoing selling pressure in the oil market.
Historical Precedents
Past geopolitical conflicts have produced similar effects on the oil market and the U.S. dollar:
- Gulf War (1990–1991): The conflict began when Iraq invaded Kuwait on August 2, 1990. The U.S. responded by deploying over 500,000 troops to Saudi Arabia, and a ceasefire was declared on February 28, 1991, after expelling Iraqi forces. During the war, oil prices doubled, and the dollar strengthened as a safe haven. Once the conflict ended, both markets returned to normal levels.
- 9/11 Attacks (2001): Marked a turning point in global security. The U.S. launched military operations in Afghanistan on October 7. The dollar initially weakened due to fears of recession but later recovered. Oil rose slightly amid uncertainty in global supply but quickly fell back as markets priced in lower demand. The market’s reaction was volatile but brief.
- Iraq Invasion (2003): The U.S. launched a massive bombing campaign aimed at dismantling Iraq’s military capacity. Oil prices surged ahead of the attack but fell sharply afterward, as infrastructure was not damaged. The dollar briefly rallied, then weakened again due to broader global economic factors.
Source: TVC, Tradingview
Source: TVC, Tradingview
Historical experience shows that geopolitical conflicts often trigger significant spikes in volatility in both the oil market and the U.S. dollar. In the cases analyzed, daily price movements in crude oil approached $5 per barrel, while the DXY index saw fluctuations of over 4 points, reflecting the market’s immediate reaction to heightened uncertainty.
However, it is also clear that these reactions are usually temporary. Once the initial tension subsides or the conflict stabilizes, both oil and the dollar tend to return to more stable behavior. Oil prices adjust upward or downward based on actual supply and demand, while the dollar's direction moderates in response to structural factors such as interest rates or economic growth.
Therefore, if the current conflict between Israel and Iran does not escalate beyond recent levels, it is likely that markets will begin to price out geopolitical risk, returning to a more controlled pattern of fluctuations in the coming weeks or months.
Possible Scenarios
It is important to note that the current conflict could lead to several key outcomes, each of which could directly impact short-term fluctuations in oil prices.
- Scenario 1: Israel and Iran halt their attacks and reach a genuine ceasefire agreement, which, in theory, began on June 23. In this case, as seen in historical events, markets would likely return to normal conditions and shift their focus back to fundamental factors unrelated to the conflict.
- Scenario 2: Iran and the U.S. avoid direct confrontation, but attacks between Iran and Israel continue. This would likely keep markets in a cautious stance, and oil price volatility would remain elevated, as seen recently. At the same time, this environment could renew interest in the U.S. dollar as a safe-haven asset, as observed in past conflicts, boosting the dollar’s value. However, as long as the Strait of Hormuz remains open, it is unlikely that a major price shock will occur.
- Scenario 3: Actions from all three parties escalate to the point of closing the Strait of Hormuz. This would be the most impactful scenario, likely leading to a sharp increase in oil prices, despite Trump’s efforts to boost domestic production. The closure of the strait would pose a real threat to global supply and oil trade, creating a risk-off financial environment that would favor U.S. dollar appreciation against other assets. In this context, one could expect a simultaneous rise in both crude oil prices and the strength of the U.S. dollar, reflecting a market clearly affected by elevated risk.
WTI Technical Outlook
Source: StoneX, Tradingview
- Sharp volatility spike: Recent fundamental developments have triggered a significant increase in volatility, pushing WTI crude prices back to the $65 area, where the 100-period moving average remains a key technical barrier. For now, this volatility surge has created a lack of clear market direction, potentially giving way to a prolonged neutral phase as new updates on the Middle East conflict emerge. Although selling pressure has dominated in recent sessions, the rising volatility has opened space for short-term bullish corrections.
- RSI: The RSI line has started to show consistent oscillations near the 50 level, which represents the equilibrium zone between buying and selling momentum. As long as the line remains around this level, it is likely that growing neutrality will continue to dominate price movements in the upcoming sessions.
Key Levels:
- 66 USD – Current Barrier: This level represents a key support, aligned with previous indecision zones and the 100-period simple moving average. Persistent price action at this level could reinforce market indecision and trigger short-term bullish corrections.
- 63 USD – Key Support: This support level aligns with a neutral zone observed in recent months and coincides with the Ichimoku cloud barrier. Price movement below this level could strengthen the current bearish bias and lead to a dominant downward trend in the short term.
- 68 USD – Primary Resistance: This level coincides with the 200-period moving average. If the price manages to return to this zone, it could challenge the prevailing bearish pressure and lead to a sustained neutral phase without a clear market direction. It may also act as a key resistance level in the face of potential bullish corrections.
Written by Julian Pineda, CFA – Market Analyst
Follow him at: @julianpineda25
