Brent crude oil price held steady above $110 on Wednesday as investors predicted a prolonged conflict in the Middle East. It has soared sharply from last month’s low of $86. 

Potential for a prolonged conflict

There is a likelihood that the US and Iran will go through a prolonged conflict this year. That’s because President Donald Trump is trapped with no easy way out.

In a statement on Sunday, Trump said that he would attack the country to push it to make a deal. Most analysts expected the attack to happen soon. 

But in a separate statement a day earlier, he said that he was asked by countries like Saudi Arabia and the United Arab Emirates to pause the strikes as the two sides were in deep negotiations.

However, in reality, the negotiations were not at an advanced stage. Instead, Trump’s decision mirrored what happened a few weeks earlier when he started his Operation Freedom and Saudi Arabia refused.

These Gulf states believe that restarting the war will hurt them as Iran has become to resilient. In recent reporting, Iran has largely recovered most of its missiles after the last attack. 

Trump’s choices in Iran

Therefore, Trump has three main choices. First, he can decide to maintain his blockade in perpetuity, a move that will affect global oil supplies. 

Second, he can decide to restart the war as his close allies like Lindsey Graham have suggested. Such a move would lead to more oil supply chain disruptions. 

One reason he might do this is the latest primary results in Louisiana and Kentucky. Senator Bob Cassidy lost his election to a Trump-backed candidate. 

Similarly, Representative Thomas Massie, who he called the Worst Republican in the House ever, lost to his preferred candidate, Ed Gallrein. Trump may feel that he is in a good political situation and decide to launch the attack.

The other unlikely option is where Trump agrees to a deal with Iran. Such a deal would likely be worse than the one signed between the US and Iran under President Barack Obama. Trump will likely not agree to such a deal as it will require concessions to Iran.

All this is happening as top agencies warn of dwindling global oil inventories. IEA estimates that these inventories are falling by over 4 million barrels each day.

It is also happening ahead of the US driving season, when demand normally drops sharply.

Brent crude oil price technical analysis

Crude oil prices chart | Source: TradingView The daily chart reveals that the price of Brent crude oil remained above the important resistance level at $110 on Tuesday morning. It remains slightly below the important resistance level at $114.85, where it failed to move above several times since March 19. 

The price has remained above all moving averages, a sign that bulls remain in control. It has also jumped above the Supertrend indicator. 

A closer look shows that it has formed an inverted head-and-shoulders pattern, a common bullish reversal sign in technical analysis.

Therefore, if this happens, the next key resistance level to watch will be at $120. A move past $120 will push oil prices much higher, potentially to $130. 

On the other hand, a drop below the 50-day moving average of $100 will invalidate the bullish outlook and point to more downside.

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