Oil Prices Retreat Sharply on Geopolitical U-Turn, what markets to watch for?

Oil prices have tumbled over 15% this week as Middle East tensions took a sharp U-turn. Crude briefly surged above $80 a barrel on Monday after the US strike on Iran’s nuclear sites but has since nosedived over two consecutive sessions, with Brent crude retreating to near $66 a barrel.

The pullback came as markets grew confident a US-brokered ceasefire between Israel and Iran would hold, with only minor flare-ups so far. Adding to the downside, Donald Trump announced on social media Tuesday that China could resume oil purchases from Iran — a move that not only undercuts years of US-led sanctions but also caught oil traders and even officials in his own administration off guard.

Oil’s sharp pullback also reflects a recalibrated risk lens across the market. While the Strait of Hormuz remains a critical chokepoint for over 20% of global oil flows, Iran has so far refrained from threatening its closure — significantly limiting the immediate risk to global supply.

On the demand side, weak consumption and elevated inventories have capped oil’s upside. Technical momentum has also faded, with oil unable to hold above key resistance. While the geopolitical premium hasn’t vanished, Iran’s tempered actions and the absence of supply disruption have shifted sentiment.

For now, upside risks remain — especially if tensions flare again. But without a supply shock (at least for what we can see now), the path higher may be slower and more fragile than feared.

Below are three markets that have been at the forefront of this week’s unusual oil price volatility:

WTI Crude

WTI crude saw a strong rally toward $80 early this week but immediately took a sharp turn to the south. Price has broken below the short-term uptrend line and dropped beneath the 200-day SMA, a key bearish signal. And the price is currently testing support around $64.50–66.50 where the conjunction of trendline and 50-day SMA.

KDJ is deeply bearish with fast lines diving below 20 with no sign of bottoming yet, suggesting oversold momentum could persist. MACD has also turned negative with increasing downside momentum. The $64.50 level is critical; a breakdown below it could accelerate declines toward $60. Upside recovery would require a move back above $68.30.

Brent Crude

Brent crude also reversed sharply after briefly breaking above the long-term descending channel. Hence, the price is now returning to its prior descending tunnel again.

The price has now broken below the recent rising trendline and sits near key support at $67–69. The KDJ indicator shows a strong bearish crossover, confirming fading bullish momentum. MACD is turning negative, with signal lines converging. A sustained break below $66.50(20 and 50-SMA) could trigger a deeper decline toward the $65 level. For now, technical bias has shifted bearish, with bulls needing to reclaim $72–75 to regain control in the short term.

ASX Energy Stocks—Santos

The Australian oil and gas exploration and production company Santos often move in tandem with oil prices, as its revenue and earnings are closely tied to global crude demand and pricing.

Santos shares surged over 47% in recent weeks but now face strong overhead resistance near the psychological $8.00 mark. The stock rejected at this level and pulled back toward the $7.09–7.65 zone, which is a confluence of horizontal support, the rising trendline, and 20-day SMA.

However, KDJ is showing a bearish crossover from overbought territory, signaling potential near-term exhaustion. MACD is still positive but flattening. A break below $7.09 would weaken the current structure and expose the next support near $6.85. Bulls need to defend current levels to maintain momentum.

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