Crude Oil: Brent targets $110 as constrained supply continues to support upward momentum

• Oil remains supported as disruptions in the Strait continue and diplomatic efforts show little progress.
• Geopolitical tensions keep the risk premium elevated amid tanker incidents and stalled U.S.–Iran negotiations.
• Brent’s outlook stays bullish, with prices potentially pushing toward $110 unless supply conditions improve.

Crude oil pulled back from earlier highs by mid-morning in the London session as markets opened the week with uncertainty over the timing and outcome of the US–Iran standoff.

Reports from Axios suggested that Iran has proposed a potential reopening of the Strait of Hormuz, offering a tentative sign of progress in what has been a slow and uneven path toward any agreement. However, this falls short of a true breakthrough. Following last week’s strong rally, the balance of risks for oil prices still leans to the upside.

What’s Driving the Oil Market?

Over the weekend, Donald Trump said he had canceled plans to send Special Envoy Steve Witkoff and Jared Kushner to Pakistan for talks with Iran. This came after Iran’s Foreign Minister Hossein Amir-Abdollahian left Islamabad without agreeing to meet US officials—hardly a sign of easing tensions.

Looking ahead, the outlook remains unclear. Tehran appears unwilling to engage while the naval blockade persists, while Washington is holding back its negotiators. This leaves markets in a holding pattern. While broader risk assets try to anticipate a resolution, oil traders are focused on the tangible factor: the actual flow—or lack thereof—through the Strait of Hormuz.

In this environment, oil prices are likely to continue edging higher unless disrupted by an unexpected shift. Recent tanker seizures and increased military activity in the Strait have reinforced the geopolitical risk premium embedded in prices.

If tensions escalate into open conflict, there is clear room for a sharper upside move. For now, as long as access through the Strait remains constrained, that premium is unlikely to fade. Rhetoric alone—no matter how constructive—has limited impact without real changes on the ground.

Ultimately, oil’s direction depends heavily on how the US–Iran situation evolves. Until there is meaningful progress, the path of least resistance remains upward, with Brent approaching a potential test of $110.

All About Oil Flows: Demand Destruction Highly Unlikely

While additional supply from producers like the United States and Russia may offer some relief, the global economy still relies heavily on energy shipments from the Gulf—underscoring the critical role of the Strait of Hormuz. The longer disruptions persist, the more pronounced the supply imbalance becomes. Demand may soften at the margins through rationing or reduced consumption, but it is unlikely to fully offset the shortfall.

In simple terms, a meaningful decline in oil prices would likely require a full reopening of the Strait and a normalization of shipping flows. Until that happens, the balance of risks remains tilted to the upside.

Technical Analysis and Levels to Watch on Brent

From a technical perspective, Brent continues to trend higher, with steady gains over recent sessions and only shallow pullbacks along the way. The move back above the $100 per barrel mark—broken earlier last week—has reinforced a bullish bias, with prices finding support on short-term dips.

Dip-buying is likely to remain a dominant theme unless conditions around the Strait of Hormuz worsen significantly. Key downside levels to watch include $103.50 and the psychological $100 mark.

In the near term, Friday’s high at $107.45 and Thursday’s high at $107.35 form an important zone. The $107.35–$107.45 range now acts as the first support area to monitor.

On the upside, resistance remains relatively thin until the $110 level, which could be tested soon barring any unexpected geopolitical breakthrough. Beyond that, the next potential resistance levels are $111, followed by $115 and $120 if bullish momentum persists.

Overall, unless a clear lower low and reversal pattern emerges, the path of least resistance for oil prices continues to point upward.