Geopolitical situation drives oil price to fluctuate sharply, and after a sharp rise in the short term, there may be a need for adjustment

On Monday, international oil prices continued their strong rebound last Friday, as Israel and Iran once again fought over the weekend, worsening the situation in the Middle East. Oil market participants worried that the conflict might spread to the entire region, seriously disrupting crude oil exports from the Middle East.

Brent crude futures rose $1.12, or 1.5%, to $75.35 per barrel; U.S. WTI crude futures rose $1.10, or 1.5%, to $74.08 per barrel. In earlier trading, the two major benchmark oil prices rose by more than $4 at one point.

Last Friday, Brent and WTI both rose by more than 7%, with the largest intraday increase reaching 13%, the highest level since January this year, showing that the market is extremely sensitive to geopolitical conflicts.

The core concern of the current conflict is concentrated in the Strait of Hormuz, the world's most important oil transportation channel. Data shows that about one-fifth of the world's total consumption of oil and related products passes through the strait every day. Once the channel is blocked, the international market may face a serious supply shortage.

Toshitaka Tazawa, an analyst at Fujitomi Securities, said: "The rise in oil prices is mainly driven by the ongoing conflict between Israel and Iran, and there is no sign of relief at present."

However, he also pointed out that with the intraday surge last Friday, some investors have begun to worry about whether the market has overreacted and there may be pressure for a correction in the short term.

Currently, Iran, a member of the Organization of Petroleum Exporting Countries (OPEC), produces about 3.3 million barrels of crude oil per day, of which more than 2 million barrels are exported per day. If Israel's attack affects Iran's energy facilities, it may cause a direct blow to its export capacity.

According to market surveys, the current spare production capacity of OPEC and its allies (including Russia) is roughly equivalent to Iran's daily production, about 3 million barrels per day. However, as some spare production capacity is in a state of technical bottleneck or political restriction, it is still doubtful whether it can fully make up for Iran's potential export gap.

In the international community, all parties are actively engaged in diplomatic mediation. US President Trump said on Sunday that he hoped Israel and Iran could reach a ceasefire agreement, but he also added: "Sometimes countries have to finish the war first." Trump stressed that the United States will continue to support Israel, but did not disclose whether he had suggested that Israel suspend its strikes.

German Chancellor Friedrich Merz said before the G7 summit: "I hope that this Canadian summit can reach an agreement on preventing the escalation of the conflict."

However, according to market research, Iran has made it clear through mediating countries such as Qatar and Oman that it will not agree to any ceasefire negotiations during the Israeli attack, which has further complicated the situation.

From a technical perspective, on the daily chart of US WTI crude oil, oil prices have formed a clear V-shaped reversal trend since late May, and are currently running above the main moving average system, with good support from the short-term upward trend line.

The MACD indicator formed a golden cross, and the momentum column continued to expand, indicating that the bulls are still dominant. The current oil price is approaching the previous high of $75. If it can effectively break through and stand firm, it is expected to launch an attack on the previous resistance range of $78 to $80.

However, it should be noted that the relative strength index (RSI) on the daily chart is close to the overbought zone. If there is no further stimulus from geopolitical news, the possibility of technical consolidation or short-term correction at high levels cannot be ruled out. Overall, the upward momentum of oil prices remains in the short term, but the probability of intensified volatility increases simultaneously, and market sentiment will continue to be constrained by the latest developments in the Middle East.