WTI staged sharp recovery after yesterday’s drop below $89, as market quickly bought dip following new U.S. strikes on Iranian facilities and reports of retaliatory actions by Tehran. Oil now trades again in $90–92 per barrel range, with investors reintroducing geopolitical risk premium into prices.
Essentially, market continues to move from one headline to another — any signs of de-escalation trigger sell-offs, while new incidents around Strait of Hormuz immediately bring buyers back in.
Rebound supported by risks around Strait of Hormuz
Current rebound is primarily driven by supply concerns: despite ongoing discussions about potential U.S.–Iran deal, shipping through Strait of Hormuz remains unstable, while insurance and logistical constraints continue to limit exports. According to estimates from EIA and several analysts, even partial normalization of flows could take months, meaning market is not yet ready to fully remove risk premium from prices. Additional support for WTI comes from declining commercial inventories and persistently strong seasonal fuel demand.
Volatility remains extreme
Recent sessions have highlighted how nervous market remains: within matter of days, WTI has traded in range from $88–89 up to $92–95, and earlier in May it even surged above $100 amid de facto crisis in Strait of Hormuz. Traders are currently pricing in two opposing scenarios — either gradual de-escalation with oil returning toward $80–85, or prolonged conflict with risk of another upward price impulse. As long as second scenario cannot be ruled out, market is likely to maintain elevated volatility and tendency for sharp technical rebounds after any sell-offs.
Near-term outlook
Inability of bulls to break resistance around $92.5 suggests downside risks toward $88.5–88.0 remain, while holding above $90 keeps chances of retest of $91.5–92.5 intact. As noted earlier in U.S. crude corrects as geopolitical risk premium eases, geopolitical factors continue to be primary drivers of oil market movements.
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