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Oil Prices Stay Stable Near Weekly Lows as Markets Ease Middle East Tension Worries

Oil steady around weekly low while markets are unwinding risk premium over tension in Middle East

Oil prices experienced a flat performance during Friday’s trading session as concerns over tensions in the Middle East waned among investors in the Asia-Pacific region. WTI crude retreated from $85.00, while Brent dipped below $90. This decline coincided with a decrease in the US Dollar Index, as safe-haven inflows reversed due to shifting market sentiments driven by recent headlines.

The drop in oil prices followed an assessment by markets that the situation in the Middle East was less risky than initially perceived. Israel’s retaliatory attack on Iran, targeting Western regions of the country, contributed to this evaluation. While tensions between Israel and Iran escalated, there was no immediate indication of a direct confrontation. However, concerns lingered regarding the potential for broader conflict in the region.

Despite the retreat in safe-haven inflows, the US Dollar continued to benefit from ongoing geopolitical uncertainties and the spike in energy prices, particularly oil. Investors sought refuge amid fears of prolonged tension, which could lead to inflationary pressures and potentially prompt further interest rate hikes by the US Federal Reserve.

Oil Prices Stay Stable Near Weekly Lows as Markets Ease Middle East Tension Worries

Oil Prices Stay Stable Near Weekly Lows as Markets Ease Middle East Tension Worries (Credits: Reuters)

As of the time of reporting, crude oil prices stood at $82.23 for WTI and $86.58 for Brent. Market analysis suggested a likelihood of easing throughout the day, with assumptions that Israel’s response had contained the situation and Iran might refrain from immediate retaliation. However, market sensitivity to headlines remained high until official communications from Iran clarified the situation.

Geopolitical tensions kept key price levels in focus, with $83.34 and $90 serving as significant thresholds for oil prices. Further escalation could push prices towards September’s peak at $94, potentially reaching an 18-month high. Conversely, pivotal support levels at $80.63 and moving averages around $79 were identified to mitigate downside risks.

WTI oil, known as West Texas Intermediate, is a benchmark crude oil traded on international markets. Its price is influenced by factors such as global economic growth, political instability, OPEC decisions, and US Dollar strength. Weekly inventory reports from agencies like the American Petroleum Institute (API) and the Energy Information Agency (EIA) also impact prices, reflecting changes in supply and demand dynamics.

While oil prices initially reacted to heightened geopolitical tensions, market assessments led to a flattening of prices as the trading day progressed. However, the situation remained fluid, with potential for further developments to influence market sentiment. Investors remained cautious, monitoring key price levels and geopolitical developments for signals of future oil price movements.

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