Oil Falls Below a Key Support amid Optimism of a US-Iran Deal. More Downside to Come?

Crude oil has fallen to $75 a barrel, extending losses for a third straight day and taking the weekly decline to 10% as hopes grow of a potential agreement between the U.S. and Iran to reopen the Strait of Hormuz.

Yesterday, both Washington and Tehran indicated that they were making progress in negotiations to reopen the vital waterway, which carries around 20% of global crude oil. U.S. Treasury Secretary Scott Bessent said he believed the two sides were nearing an agreement and that a deal could be reached in the next day or two.

However, despite improving diplomatic signals, risks remain elevated. Another commercial vessel came under attack in the Strait of Hormuz yesterday, highlighting how fragile the security situation remains around the critical waterway.

Can oil fall further?

This is not the first time that the market has been optimistic about a deal between the U.S. and Iran. The previous ceasefire saw the Strait reopen before quickly closing again. So even if the two sides agree to reopen the Strait of Hormuz, keeping it open could prove more challenging given how complicated the broader nuclear talks are likely to be. This could keep oil prices volatile.

This suggests that while some of the geopolitical risk premium is coming out of oil, a sustained move lower may require evidence that shipping through the Strait can normalise rather than simply an agreement to reopen it.

The market will likely want to see confirmation of a new U.S.-Iran agreement and evidence that shipping through the Strait of Hormuz is returning before oil prices fall significantly further. On the other hand, a fresh escalation in tensions or attacks on vessels or other targets in the region could quickly see the geopolitical risk premium return and oil prices rise again.

Oil (WTI) breaks below the 200-day EMA

Oil trades below its falling trendline resistance, which dates back to early March. The price has also fallen back below its 50- and 200-day EMAs, maintaining a bearish bias. Combined with the RSI below 50, this keeps sellers hopeful of further downside.

Sellers will look to extend the decline towards the $67–$70 support zone, which includes the July low and the 78.6% Fibonacci retracement of the $55–$120 move. A break below this zone would open the door to the psychological $60 level, ahead of the 2026 low at $55.

Oil faces a cluster of resistance overhead, including the 200 EMA at $79, the 61.8% Fibonacci retracement at $80 and the 50 EMA at $82.50. Should buyers reclaim these levels, $88 comes into focus, the 50% Fibonacci retracement ahead of the falling trendline resistance. A break above here would shift attention to $95, the 38.2% Fibonacci retracement.