Oil Extends Decline as Hopes Rise for a U.S.-Iran Diplomatic Breakthrough
Brent crude opened the week under heavy pressure, gapping lower by nearly $7 per barrel on Monday as easing geopolitical tensions in the Middle East reduced concerns over potential supply disruptions. Market sentiment improved after President Donald Trump canceled a planned military strike on Iran and announced a new round of negotiations aimed at de-escalating the conflict.
Additional pressure came from OPEC+, which agreed to raise production by 188,000 barrels per day starting in September, reinforcing expectations of increased global supply in the months ahead.
The combination of improving diplomatic prospects and higher anticipated output triggered a sharp pullback in oil prices, pulling Brent further away from the $100 mark. Although prices briefly climbed above that key psychological level in late July, the move lacked follow-through and failed to establish a sustained breakout.
Investors remain cautiously optimistic that renewed diplomatic efforts between Washington and Tehran may succeed where previous attempts have failed. However, significant obstacles remain, particularly regarding the future of Iran’s nuclear program and control of the Strait of Hormuz, issues that continue to represent major sticking points in any potential agreement.
From a technical perspective, the outlook has deteriorated following a double rejection near the $90 resistance zone and the subsequent acceleration lower. Momentum indicators have weakened, while Brent has slipped below the daily Ichimoku cloud, reinforcing near-term bearish signals.
Attention is now focused on key support levels at $80.66 and $80.50, followed by the important psychological support at $80.00. A decisive break below these levels would confirm a continuation of the decline from the July peak at $101.97 and complete a bearish failure-swing pattern, opening the door for a move toward the $70 region.
On the upside, the lower boundary of the broken Ichimoku cloud near $83.48 now acts as initial resistance, followed by the daily Kijun-sen at $86.05. These levels are expected to cap corrective rebounds while the broader bearish bias remains in place.
Res: 83.48; 86.05; 86.70; 90.00
Sup: 80.50; 80.00; 75.28; 71.92
