The Trump administration is planning to impose sanctions on Moscow’s secret fleet of oil tankers and various companies that help them operate. This decision comes along with a 50% tariff increase on India for buying Russian oil. The goal is to reduce Russia’s oil sales and warn other countries that they may face high tariffs on exports to the U.S. if they continue to do business with Russia. In the oil market, prices have increased slightly, now at around $65.75, which is about $0.60 higher. However, prices must drop below $64.96, the 100-day moving average, to indicate a more negative trend.

Diplomatic Communications

Trump plans to talk with Ukrainian President Zelenskiy after a recent meeting between U.S. Special Envoy Witkoff and Russian President Putin. Kremlin aide Ushakov called those talks with Witkoff productive, discussing the Ukraine crisis and the future of U.S.-Russia relations. Although Trump is not interested in speaking directly with Putin, he is ramping up pressure. He has also sent two nuclear submarines to strategic areas in response to provocative comments from former Russian President Dmitry Medvedev. The decision to sanction Russia’s oil tankers and penalize importers like India marks a significant escalation. For traders, this indicates a period of increased volatility in energy markets in the coming weeks. The main focus should be on crude oil derivatives, as these policies could severely disrupt global oil supply. We might want to prepare for a potential spike in oil prices. These sanctions could threaten a large portion of the nearly 4.5 million barrels per day that Russia exports through its hidden fleet. This comes on the heels of yesterday’s EIA report, which revealed an unexpected drop of 4 million barrels in U.S. crude inventories, worsening the market’s supply tightness.

Market Reactions and Historical Context

We remember how oil prices spiked back in 2022 when the invasion of Ukraine caused Brent crude prices to soar over $120 a barrel due to supply concerns. Current prices around $65 seem low given the risk of a similar, albeit smaller, shock if these sanctions take effect. This historical context indicates significant upside potential from current levels. The deployment of nuclear submarines and the ongoing diplomatic tension contribute to market uncertainty. The VIX, a measure of market fear, has risen from 14 to 18 in the past month, and these recent developments will likely push it even higher. As a result, buying call options on oil or ETFs focused on volatility could be a smart strategy to benefit from rising prices and increasing market anxiety. At the same time, we need to watch the technical situation closely. The 100-day moving average at $64.96 is now a key support level. If prices break below this mark, it could indicate that the market is ignoring geopolitical issues, signaling a bearish trend and prompting a reevaluation of bullish investments. Create your live VT Markets account and start trading now.

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