Geopolitical Tensions Ease, Oil Prices Face Mixed Influences

Concerns over a potential escalation of geopolitical tensions in the Middle East have diminished after Iran indicated it would not retaliate against a limited-scale missile strike by Israel. This development has eased the risk premium in markets, subsequently exerting downward pressure on crude oil prices. However, the ongoing conflict between Israel and Hamas continues to pose risks, maintaining some level of support for oil prices due to the continued geopolitical uncertainty in the region.

Additionally, expectations of interest rate cuts by major central banks aimed at supporting economic growth—which could increase fuel consumption—and a surprising decrease in U.S. crude inventories have helped to mitigate further declines in oil prices. Specifically, the American Petroleum Institute (API) reported a significant drop of 3.2 million barrels in U.S. oil inventories for the week ending April 19, which has contributed to the optimistic outlook on demand.

Looking ahead, traders are awaiting the official U.S. crude inventory data to confirm the substantial reduction and to gain clearer market direction. Moreover, the upcoming release of U.S. Durable Goods Orders could impact the USD and create short-term trading opportunities in crude oil markets. The primary focus for the markets, however, is set on the forthcoming Advance US Q1 GDP report and the Personal Consumption Expenditures (PCE) Price Index, scheduled for release on Thursday and Friday, respectively, which are expected to provide significant insights into economic trends and consumer spending.