Despite elevated geopolitical risks in the Middle East, oil prices have struggled to sustain upward momentum. The market's muted response to Iran-Israel tensions signals that a significant geopolitical premium may already be priced in, leaving crude vulnerable to downside if tensions ease or fail to escalate further.

At the same time, U.S. inflation surprises and delayed Fed rate cuts are strengthening the dollar, creating a headwind for oil priced in USD. Tighter financial conditions could also temper global demand, especially in energy-intensive sectors.

Moreover, global oil inventories, while low, are not critically tight, and OPEC+ has shown consistent discipline in managing supply—but if demand expectations falter or if there's any hint of a quota increase, that could trigger a selloff.

Geopolitical risk premium looks overbaked

Stronger USD and tighter monetary policy weigh on demand

Supply remains stable, with limited immediate threats

Positioning is crowded long, raising the risk of a pullback on any disappointment

SHORT WTI

May 05 2025

Pending

Published 57d ago

64.722

Current price

56.887

Entry price