Crude oil prices surged on July 23, climbing to their highest level since June 8 as the Middle East crisis intensified, prompting analysts to warn that the rally may be far from over. 

Brent crude, the global benchmark, rose to $96.16, up 37% from its June low. Meanwhile, West Texas Intermediate (WTI) climbed toward the key psychological resistance level of $90 a barrel.

Crisis in the Middle East escalates

The crisis in the Middle East escalated overnight, with the US and Iran warning of more strikes in the near term. On Tuesday, Trump warned that the US would kill more Iranians for any American military member killed.

He then warned that the US would hit Iranian bridges and power plants for any ship that is struck while attempting to cross the Strait of Hormuz.

At the same time, Trump has continued to increase the number of troops in the region, with some experts predicting that he may decide to take one of Iran’s islands. 

He has also threatened to bomb Iran’s Pickaxe mountains, where the country has been building its nuclear program. Israel warned that Iran had moved some of its centrifuges there.

Iran has warned that any attacks on its critical infrastructure will push it to launch similar attacks in the region.

Last week, the country’s military warned bombed a power plant and desalination plant in Kuwait after the US hit a water storage facility in the country. That hit was a threat to what Iran was capable of doing.

Yemen’s Ansar Allah continued their threat to shut down the Bab Al-Mandab Strait. According to media reports, the group launched fire on a ship that was attempting to cross. Other ships started to turn around.

In a recent statement, Professor John Mearsheimerwarned that these events will likely put more pressure on the energy market. He also warned that Iran may also target the UAE’s Fujairah port, which handles millions of barrels of oil a week.

China is another wildcard in the oil market. The country has reduced its oil purchases in the past few months, and some analysts believe that it may want to restart the purchases. 

All this is happening at a time when oil inventories are at significantly low levels.

As a result, the supply and demand dynamics mean that crude oil prices may continue rising in the foreseeable future, with Goldman Sachs warning that they may go back to $120.

Brent crude oil price forecast

Brent crude prices chart | Source: TradingView

The daily chart shows that the Brent crude price has been in a strong upward trend in the past few days. It moved from a low of $70.55 on July 2nd to the current $96. 

Oil has jumped above the 50-day Exponential Moving Average (EMA) and the bottom of the trading range of the Murrey Math Lines tool. Also, the Relative Strength Index (RSI) has continued rising.

Therefore, the most likely scenario is for oil prices to continue climbing, with bulls targeting the key Major S/R pivot level at $100.

The main risk to this outlook is the fluid situation in the Middle East, as any signs of ceasefire negotiations or diplomatic progress could trigger a sharp reversal.

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