Brent crude is pushing toward $100 a barrel as the Middle East conflict escalates, and the rally is now feeding into inflation expectations and the US dollar. Technical readings on the 5-hour chart show the breakout has turned overbought, with a pullback from the $94.82 level considered likely.
Escalation keeps the risk premium high
The escalation of the conflict in the Middle East is driving oil prices higher, and investors are increasingly concerned that the situation is evolving into a protracted, unresolved armed conflict. That concern is keeping the risk premium on Brent futures high. The market has largely brushed aside Donald Trump's remarks that a large volume of oil passes through the Strait of Hormuz, and Treasury Secretary Scott Bessent's statement that the waterway will become a worthless stretch of water within two years.
According to the US Department of Energy, around 8 million barrels a day currently pass through the Strait of Hormuz, with a further four to five million barrels a day moving through alternative routes from the Gulf states.
Dollar strength adds to Fed pressure
The rally is not confined to oil. The US dollar has climbed to two-week highs, lifted by strong macroeconomic data, hawkish comments from FOMC officials, rising Treasury yields and higher oil prices. The currency is also benefiting from its safe-haven status as the Middle East conflict intensifies.
Manufacturing activity has stayed above the key 50 mark for an eighth straight month, and August's PMI reading was the second-best since 2022. FOMC Governor Mark Barr said rates should rise if inflation does not keep slowing, and the probability of a Fed rate hike in September has climbed to 68%. The longer Brent and North Sea crude stay elevated, the greater the risk that inflation pressures broaden, which would leave the Fed little choice but to tighten interest rates further.
Chart flags an overbought breakout
On the technical side, Brent rocketed out of an ascending triangle pattern at $94.00 and is now trading at $94.82, just off its recent peak of $95.46. The RSI stands at 76.56 and the Money Flow Index at 99.24, while price sits outside the upper Bollinger Band at $93.95 — all pointing to an overbought market.
Traders are watching support at $91.28 and $93.95 for signs of a pullback, with the $94.00–$98.00 zone flagged as the riskiest area to chase. A drop in the RSI below 70 would point to a deeper retracement before the next move higher.
Sources: ActionForex, Investing.com
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