Oil prices are climbing due to recent tensions between Iran and Israel. WTI crude rose to $77 after the US took action against Iranian nuclear sites but has since stabilized, showing a daily increase of 1%. This conflict is causing more market volatility as traders consider how it might affect oil supply, particularly through the Strait of Hormuz. Despite being a significant OPEC producer, Iran’s influence in the region has weakened over time. Threats to close the Strait of Hormuz have not led to major disruptions in the past, mainly because of the military presence from countries like the US. The fear of a “worst-case scenario” might cause sudden spikes in prices. However, if prices reach $90 or $100 per barrel, traders may see this as a chance to short, given existing market trends. Previous supply issues have often been overstated, and while current geopolitical tensions are serious, they may not lead to a long-lasting increase in prices. Currently, oil prices are stabilizing between $66 and $80. Any overly dramatic response to potential disruptions could be viewed as a selling opportunity, following the strategy of “buy value, sell hysteria.” The market is aware of possible disruptions but is responding with caution. Essentially, this situation highlights the balance between perception and reality. The initial rise in oil prices, prompted by recent military actions, is not surprising. When there are reports of threats to supply routes in politically sensitive areas, markets often react quickly. We’ve seen this pattern—news breaks, futures rise, and volatility heightens. However, actual disruptions to output or transport rarely occur immediately. It’s important to note that oil prices, despite sensational headlines and geopolitical drama, are staying within a familiar range. This suggests that while concerns are present, there hasn’t been significant action regarding real supply constraints. Market participants are reacting but not overreacting—at least not on a large scale. Understanding that emotional responses don’t always lead to long-term price changes is crucial. Short-term spikes driven more by fear than fundamentals often don’t last. Yes, the Strait of Hormuz is vital—about one-fifth of global oil flows through it—but history shows that significant blockages don’t happen easily. This historical context influences current pricing. When we consider all these factors, it becomes clear that any sudden price increase, especially at the upper end of recent movements, may be more of a chance to exit than to enter. If WTI crude approaches or exceeds $90 without real backing, we would see it as ripe for a potential reversal. This view stems from historical trends, which indicate a lack of sustained price increases without actual supply cuts. Traders should remember the importance of timeframes. Short-term futures often quickly correct themselves if the initial drivers of price changes don’t pan out. This creates opportunities when trading volume grows disproportionately compared to actual shifts in crude fundamentals. During conflicts, optionality increases. Premiums rise not because blockages are guaranteed, but due to hedging against risks. When volatility spikes ahead of actual outcomes, strategies that profit from time decay without taking sides can be effective. These strategies tend to perform well when expectations move ahead of actual volatility. The pattern is evident: markets are factoring in fear but not necessarily forthcoming consequences. The more limited the physical response, the less sustainable the price increase. Recent attempts to push beyond higher levels have often failed unless supported by real reductions in output or supply. This market environment favors a strategy that capitalizes on reverting trends rather than chasing breakouts. Monitoring sentiment indicators, such as COT reports and options skew, is crucial. These indicators often adjust faster than spot prices and can signal when positioning becomes overly one-sided. Volatility, while high, remains orderly, which is significant. It suggests that there is no panic, but there is caution. In this context, fading extremes when sentiment peaks can be a reliable strategy. New long positions should only be considered when there is a substantial shift, not just noise. For those looking at the technical side, the repeated rejection near the upper range is telling. The market seems to prefer clear signals. Without confirmation of a change in supply and demand dynamics, any upward movement beyond previous highs is likely to be temporary. So, while headlines may be alarming, the market doesn’t respond immediately—and neither should we.

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