Oil Price Surge and the Strait of Hormuz Crisis — The $130 Barrel Scenario
Oil Price Surge and the Strait of Hormuz Crisis — The $130 Barrel Scenario
TL;DR Oil is making textbook higher lows and higher highs on the daily chart since early March. USO broke past 2022 highs and is approaching 2018 levels — a breakout targets 155–160, implying $120–$130 per barrel. Yemen's threat to close the Strait of Hormuz, through which 20% of global oil trade passes, could turn this into a full-blown energy crisis.
I've been watching the oil daily chart closely since early March. One thing is absolutely certain — this is not a bearish chart.
The Signal Everyone Is Ignoring
While SPY bounced and QQQ rallied, most market participants were celebrating. "We bottomed, it's going up from here." But the one thing I've been emphasizing over and over went completely unnoticed.
Oil.
On a 15-minute chart, oil might look weak. But zoom out to the daily timeframe and you see an entirely different picture. Since early March, oil has been printing clean higher lows and higher highs. This is a textbook uptrend.
What USO Is Really Showing
The USO chart — the ETF that tracks crude oil — paints the picture even more clearly.
A perfect breakout at 110, retest, and breakout again. This was the 2022 high. After breaking and holding above it, price shot straight to 130. Now we're sitting at 2018 highs.
A breakout here targets the 155–160 zone. That's another 20-point move, and in barrel terms, we're talking about $120–$130 crude.
The Strait of Hormuz — The World's Energy Chokepoint
This is where the story turns serious.
Saudi Arabia and the UAE are making moves to get involved in the conflict. Why does that matter? Because of Yemen's response. Yemen has already warned — if anyone else joins the war on the side of the United States and Israel, they will shut down the Strait of Hormuz and the Red Sea corridor.
Consider these numbers:
- 10% of global trade flows through the Red Sea
- 20% of all oil trade passes through the Strait of Hormuz
If both are cut off simultaneously, you're not looking at one front — you're looking at two. The waterway connecting the Red Sea to the Persian Gulf, and the Strait itself. A complete disconnection of global energy supply chains.
Europe and NATO's Impossible Position
UK Prime Minister Starmer essentially said "things are going to get bad, but we're not going to do anything." Australia's prime minister offered "we didn't start this, but we'll get through it."
But look at what European countries are actually doing with their energy laws and regulations. This isn't passive observation. The structure being created is one where NATO countries may have no choice but to be pulled in.
Easter Weekend Could Be the Inflection Point
Ground troop deployment is being discussed ahead of Easter weekend. Markets will be closed while the situation could shift dramatically.
I've been waiting for a pullback in oil to add positions, and honestly, it hasn't come. As long as higher lows and higher highs hold, the direction is up. That's also why finding an attractive entry in oil right now is so difficult.
The entire market is falling, yet oil is moving in the opposite direction — that is the single most important signal right now.
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