West Texas Intermediate (WTI) is currently trading at about $72.15 during Asian hours on Monday. This rise follows Israel’s military actions against Iran’s natural gas facilities, which have sparked fears of supply disruptions in the area. Iran is considering closing the Strait of Hormuz, a key route for transporting around 20% of the world’s oil. If this route is blocked, oil prices could rise due to supply issues.

Impact Of Potential US Tariffs

US President Donald Trump is thinking about reintroducing tariffs on trade partners, which could affect WTI prices. This uncertainty increases the risk of oil prices dropping amid geopolitical worries. Later, we will see China’s retail sales and industrial production data for May. If the results are weaker than expected, oil demand may fall, impacting WTI prices since China is a major oil consumer. WTI oil, or West Texas Intermediate, is a high-quality crude oil traded worldwide. It is described as “light” and “sweet” due to its low gravity and sulfur content, making it a benchmark for oil prices. Prices of WTI oil are influenced by supply and demand, global economic growth, political factors, and OPEC decisions. Inventory data from the API and EIA also plays a role, with the EIA data generally being more reliable. OPEC can influence prices by adjusting production quotas during its biannual meetings.

Geopolitical And Economic Tensions

The rise in WTI prices to just above $72 shows a strong reaction to increased worries about oil supply, especially because of recent military actions in the Middle East. Israeli airstrikes on Iranian gas infrastructure have heightened fears about the security of supply. Iran’s suggestion to potentially close the Strait of Hormuz—a critical maritime route for global oil—indicates that the threat to supply is real. This strait handles about 20% of oil trade worldwide, so any disruption would quickly impact the markets. In addition to geopolitical risks, the US trade policy is also creating questions about pricing. As Trump considers reintroducing tariffs, there may be a strain on demand. Historically, such policies have slowed cross-border trade and manufacturing. If these sectors decline, energy demand—particularly oil, which is closely linked to industrial activity—may also decrease. Meanwhile, traders are closely monitoring China. Upcoming May data on retail sales and factory output will reveal much about domestic demand in the world’s largest oil consumer. Weaker figures could signal a sluggish economy and put downward pressure on oil prices, raising concerns about over-supply. The extent of the effect will depend on how far the data falls short of expectations. On the technical side, WTI’s high quality continues to support its role as a pricing benchmark. Its light and sweet characteristics require less processing and typically command a premium price. However, long-term pricing depends more on who is buying and how much, rather than the oil itself. OPEC’s production quotas still serve as a price control mechanism. Changes in these limits can either tighten or loosen supply, although market reactions can vary based on inventory levels and the speed of these adjustments. As traders, it’s essential to anticipate market reactions rather than just chase headlines. We need to consider whether current prices already reflect geopolitical tensions or if there’s potential for continued movement. Inventory data—especially from the EIA—provides a clearer picture of whether supply is tightening or if sentiment is outpacing reality. Strategically reacting to these releases can help navigate the noise in the market. Finally, macroeconomic indicators should not be taken in isolation. A disappointing report from Asia wouldn’t just affect demand; it might also lead other markets into a risk-off stance, strengthening the dollar. A stronger dollar can press further on oil prices, as it makes dollar-priced commodities less appealing to foreign buyers. Therefore, we must assess all these factors simultaneously when making price decisions, focusing on strategy over impulse and being ready to adjust when there isn’t clear confirmation. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now