BRENT CRUDE OIL KEY TAKEAWAYS:
- Brent crude oil is trading above $116 (+2.5% on the day), while WTI crude oil holds above $100.
- Fears of a US-Israeli strike on Iran over the weekend are building on top of ongoing Houthi attacks against Saudi Arabia.
- Brent's uptrend has accelerated since the start of October, with previous-resistance-turned-support near $108.
Brent Crude Oil Forecast
It's a common financial media trope that every flare-up in the Middle East is the one that sends oil prices into orbit, but this weekend, the risk may be real.
A fiery speech from President Trump this morning, along with major upcoming elections in Israel and the US, has traders fearing the potential for weekend escalation in Iran. Because markets may be closed while any attack unfolds, traders are reluctant to go into the weekend without protection. The result is a risk premium being built into Brent crude oil in real time.
Underscoring that point, ongoing Houthi attacks against Saudi Arabia had already kept Gulf supply risk front and center, and warnings circulated this week that Iran could target US bases and energy infrastructure in the region if attacked. Reports suggest any US strike may be limited, but it is the retaliation that matters for oil: a response that reaches Gulf energy facilities would turn a risk premium into an actual supply disruption.
The oil rally is already spilling into other markets, with the US dollar edging higher and US indices slipping after a big sell-off in the AI trade. Notably, the 10-year US Treasury yield is still edging lower toward 5% even as oil rallies, a sign that rising energy prices and broadly higher interest rates are starting to take a toll on the global economy and investors’ risk appetite.
Against that backdrop, the market interpretation of the weekend is relatively straightforward: A strike that draws retaliation against Gulf energy infrastructure would likely send Brent sharply higher when markets reopen, boosting the buck at the expense of risk assets. Conversely, a limited strike, or no strike at all, could see some of the premium unwind quickly, especially with a trilateral meeting between the US, Ukraine and Russia planned for early November.
Either way, the stakes are high heading into the weekend, so traders should be prepared for significant volatility in oil and the markets that trade off it.
Crude Oil Technical Analysis – Brent Daily Chart
Source: TradingView, StoneX
As the chart above shows, Brent Crude Oil has been broadly trending higher since at least the start of August, with the uptrend accelerating into a steeper bullish channel this month. This week’s break to 5-month highs above the $108 level now opens the door for a retest of the early-war highs near $114, especially if we see renewed US-Israeli strikes against Iran this weekend.
For now, the technical path of least resistance remains definitively to the topside, and only a break below $108 would moderate the near-term bullish bias. Regardless of the markets you trade, oil is worth watching as we head into the final week of October.
-- Written by Matt Weller, Global Head of Research
Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX
