West Texas Intermediate crude oil retreated on Monday despite mounting supply risks tied to Iran, underscoring the market’s reluctance to sustain a rally on geopolitical threats alone.
Iran-related supply disruptions have repeatedly failed to generate sustained bullish price action in recent sessions, with the latest selloff coinciding with a potential easing of tensions. Pakistan’s interior minister said Tuesday that significant progress had been made in talks with Iran aimed at restoring a memorandum of understanding signed with the U.S. earlier this year. Reports also indicated former U.S. President Donald Trump had urged Pakistan’s army chief to facilitate negotiations with Tehran, raising the prospect that secondary sanctions threatened by U.S. Treasury Secretary Scott Bessent may not materialize.
The analysis suggests the market’s muted response reflects skepticism toward the durability of any diplomatic breakthrough. The history of Iran-U.S. nuclear negotiations has been marked by repeated setbacks and reversals, leaving energy flows through the Strait of Hormuz vulnerable to sudden disruption.
On the technical front, WTI’s rejection at downtrend resistance from March highs late last week completed a three-candle evening star pattern, a bearish reversal signal that warns the August rally may be losing steam. The pattern does not guarantee an immediate downturn but increases the importance of near-term price action for confirmation.
The $83.60 per barrel level is now a critical inflection point. The analysis notes the level has acted as both resistance and support multiple times this month. A sustained break below $83.60 would reinforce expectations for a deeper pullback, with downside targets at $80 per barrel and a cluster between $78.40 and $77.33 per barrel, where the 50-day and 200-day simple moving averages converge with horizontal support at $77.50.
Further weakness could signal a break of the uptrend from July lows, potentially setting the stage for a retest of July’s lows within a symmetrical triangle pattern that has contained price action over the past two months.
Momentum indicators align with the cautionary technical view. The 14-day Relative Strength Index has broken its uptrend from August and now sits just above the neutral 50 level, while the Moving Average Convergence Divergence indicator is converging with its signal line despite remaining in positive territory. The analysis concludes that upside momentum is waning, increasing the likelihood of a directional shift.
Conversely, a decisive break above the March downtrend resistance would shift the balance back toward the bulls, with resistance levels at $87.65, $93.30 and $95 per barrel coming into focus for potential long positions.
