Oil jumps as reigniting tensions in Middle East lowers chances of Gaza ceasefire deal

• Oil pops above $75.00 with Israel and Hezbollah entering into tit-for-tat attacks. 
• The recent uprising in tensions and violence might put negotiations for a ceasefire deal in Gaza on loose screws. 
• The US Dollar Index trades back to 101.00 after its steep decline last week. 

Oil prices are pumping higher on Monday after violence picked up in the Gaza region and Israel and Hezbollah exchanged heavy fire, with several bombings and drone attacks from both sides during the weekend. The major escalation in the region could not come at a worse time as a ceasefire deal for Gaza is still being negotiated. This violence could put any potential accord on loose screws and might even expand the conflict to other countries in the region.

The US Dollar Index (DXY) is licking its wounds after posting one of its worst weekly performances in over a year. US Federal Reserve Chairman Jerome Powell confirmed on Friday that an interest-rate cut is coming in September, but markets seem to be heading too far ahead of themselves by pricing in big rate cuts before the year ends. If the Fed wants to obtain a soft landing, it needs to cut gradually and slowly, not by big heaps as markets are expecting. 

At the time of writing, Crude Oil (WTI) trades at $75.60 and Brent Crude at $79.21.

Oil news and market movers: Mayhem helps hedge funds

• Bloomberg reports that Citigroup sees a big risk to a Libyan Oil disruption considering the recent local turmoil picking up with Israel. 
• The above element is reflected in the Brent-Dubai spread in Crude prices, which is widening substantially. 
• Meanwhile, Libya’s Waha Oil has said to start cutting its output gradually, Bloomberg reports, under a blockade of exports. 
• China’s largest Crude refiner, Sinopec, is facing headwinds as the country’s economic slowdown weighs on its profits. The demand for Diesel especially remained poor, Reuters reports.

Oil Technical Analysis: It got a bit too bearish

Oil is in good condition at the start of the week. The feared sell-off from hedge funds last week did not take place, and with the recent rally at hand, more positioning could take place. The recent violence over the weekend might even put question marks on the feasibility of a ceasefire deal taking place between Israel and Hamas. Should any headline in that direction be reported, expect to see another steep surge in Crude prices. 

On the upside, the double level at $77.65, which aligns with both a descending trendline and the 200-day Simple Moving Average (SMA). In case bulls are able to break above it, the 100-day SMA at $78.45 could trigger a rejection.  

On the downside, the low from August 5 at $71.17 is working its magic as it was able to eke out a bounce that now enters its third day. Under $70.00, the $68.00 big figure is the first level to watch followed by $67.11, which is the lowest point from the triple bottom seen back in June 2023. 

US WTI Crude Oil: Daily Chart