Brent - Trump Calls Off the Strike, and Oil Drops 5%

Brent trades around $82 today after falling more than 5%. President Trump said on Sunday that he had cancelled a planned attack on Iran, and that negotiations would restart on Monday. Traders reacted immediately.

The contrast with last week is striking. On Friday, US media reported that the president was preparing a new round of strikes, hopes for a settlement were fading, and energy prices were rising toward $90. Three days later, the opposite is being priced in.

This is worth understanding for anyone trading oil right now. Very little has changed in actual supply. Tankers keep moving through the Strait of Hormuz, and traffic has been increasing rather than falling. What moves the price is the expectation of a disruption, not a disruption itself. When that expectation rises, oil jumps. When it fades, oil falls just as fast.

The effect reaches beyond energy. European stocks opened higher and US futures rose, because cheaper oil supports company profits and cools inflation. That matters this week: the US jobs report lands on Friday, and the Fed is still deciding whether it needs another rate hike. Every dollar off the oil price makes that decision easier.

The caution is simple. This story has flipped three times in the past month alone. Nothing has been signed, and talks have collapsed before. Sharp moves in both directions remain the base case.

Brent key levels:

• Resistance: 86.50, then 90.00

• Support: 80.50, then 77.00

Watching: today's US-Iran talks, tanker traffic through the Strait of Hormuz, Friday's US jobs report.

By Born2trade market research department

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