Recent tensions in the Red Sea have led to a significant increase in oil prices, influenced by regional dynamics and U.S. sanctions on Iranian and Venezuelan oil. Despite this spike, expectations for a lasting rally are tempered by uncertainty regarding U.S. trade policies and global demand concerns. Without clearing $70 per barrel, market activity remains cautious, indicating that while short-term pressures exist, broader factors like U.S. production increases and weak global demand limit further price rises in the medium term.
The escalation of Red Sea tensions over the weekend was a key driver behind oil's gap higher at Mondays open.
Lingering uncertainty over U.S. trade policy and mounting concerns about the economic outlook are capping risk appetite, limiting oil's upside.
Until crude clears $70 per barrel, the market is likely to remain in a holding pattern.
One key risk to watch: If the U.S.-Ukraine resource development deal progresses, that could weigh on prices in the near term.
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