Crude Oil Climbs to Highest Level Since 2018 on Supply Fears

WTI crude soared above $110 as a Strait of Hormuz blockage cut global shipments, amplified by US-Iran tensions. Technicals warn of overbought conditions.

A potent combination of geopolitical threats and a significant physical supply disruption sent oil prices soaring on Thursday. West Texas Intermediate (WTI) crude futures surged by more than ten percent at one point, driven by heightened fears of a prolonged shortage emanating from the Persian Gulf.

Supply Disruption and Political Rhetoric Fuel Rally

The immediate catalyst was a severe blockage at the Strait of Hormuz, which has effectively removed approximately one-fifth of global oil shipments from the market. This physical shortage was compounded by aggressive statements from the White House, which issued stark warnings targeting Iran's energy infrastructure. President Trump intensified his rhetoric, threatening severe retaliatory measures if American ceasefire terms were not met.

This environment triggered a flood of buy orders from traders, propelling the front-month WTI contract to a session high above $111 per barrel. The benchmark ultimately settled at $110.53, marking its most elevated price in nearly four years. The market structure reflects extreme stress, with a pronounced backwardation indicating that spot prices for immediate delivery are trading at a substantial premium to futures for later dates.

Overbought Signals and Key Price Levels

Despite the powerful bullish momentum, technical indicators suggest the rally may be overextended. The Relative Strength Index (RSI) is currently flashing a warning, having crossed above the 70 percent threshold into overbought territory.

Market activity revealed a split in strategy. While speculative traders aggressively built long positions betting on further gains, physical oil producers actively used the elevated price environment to execute hedging operations. Attention now turns to several critical technical levels that could dictate the market's next move:

• Immediate Resistance: $112.30
• Long-Term Target: $119.50
• Psychological Support: $100.00
• Major Call Option Barrier: $85.00

The immediate fundamental outlook will be influenced by the upcoming weekly inventory report from the American Petroleum Institute (API). Analysts are forecasting a drawdown of 1.3 million barrels in US crude stocks, a development that would reinforce the narrative of tightening supply. Whether prices can sustain a foothold above the $110 level is now largely contingent on the evolving situation in the Middle East.