The oil market is waiting for the other shoe to drop, fearing that the US will resume strikes on Iran. However, an escalation could turn into a classic case of “buy the rumor, sell the fact.” Let’s examine the factors driving oil prices and develop a trading strategy for Brent.
The article covers the following subjects:
Major Takeaways
- Price gaps between oil grades are soaring.
- Shipping costs influence oil prices.
- The US gains from cheaper oil.
- Consider selling Brent when it climbs to $118.5 and $124.
Weekly Fundamental Forecast for Brent
Oil is like real estate, as its value depends on location. Before the armed conflict in the Middle East, the spread between Brent and WTI had long stayed within $3–$5 per barrel. In 2026, it jumped above $40. The market is now highly fragmented. A barrel of Brent costs $120 in Rotterdam, WTI goes for $100 in the Gulf of Mexico, and Oman crude fetches $150 in China.
Spread Between Crude Oil Grades
Source: Bloomberg.
Shipping costs are playing an increasingly important role. Rates for tankers crossing the Strait of Hormuz are at record levels, and just 3–4 trips can now pay for a new vessel. No wonder greed in the oil market has long outweighed fear, and Middle Eastern exports climbed above pre-war levels. Rising geopolitical tensions have cut exports to 12.65 million bpd, down from 17.15 million bpd at the end of February.
Several factors are driving the Brent rally. Exports have retreated from their autumn highs, transportation costs are at record levels, and global inventories are shrinking. Demand from the US and China is also rising, and the market fears further conflict escalation. Washington says it is preparing for a protracted war, while Donald Trump is weighing whether to strike a deal or end the standoff in the Middle East by force. The time for decisions has come, and the US means business.
Brent Weekly Price Performance
Source: Bloomberg.
In fact, the US is in no hurry. The country buys three-quarters of its imported oil from Venezuela, Mexico, and Canada, paying much less than the global market price. Iran is in a very different position. Its budget depends on oil sales, but it cannot export.
According to the Commonwealth Bank of Australia, only a Brent increase to $150 per barrel would curb global demand and push prices lower. The International Energy Agency (IEA) believes the oil market will not get back to pre-conflict levels in 2027. The bullish backdrop is therefore likely to last, and the rally has yet to reach its full potential. Markets often fear an event more than the event itself. Worries about escalation matter more than the Houthis’ actual attacks on Saudi Arabia or Iran’s attacks on tankers in the Strait of Hormuz.
Paradoxically, if US airstrikes resume, Brent could fall. The rally has been built on rumors for a long time, and once the facts arrive, traders are likely to sell.
Weekly Trading Plan for Brent
A major escalation before the primaries looks unlikely, although it cannot be ruled out. For now, it makes sense to buy Brent on pullbacks and then switch to selling once prices rally into resistance at $118.5 and $124 and pull back.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of UKBRENT in real time mode
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