Renewed hostilities between India and Pakistan are adding to global oil supply concerns, helping push prices back above the $60 mark, despite no confirmed disruption to physical oil flows.
India, the world’s third-largest oil importer, is now at the center of geopolitical tensions that are driving risk premiums in oil markets. These tensions come just as OPEC plans to gradually unwind production cuts, starting with a 411,000 barrels-per-day increase in June 2025, as confirmed in the group’s latest monthly report.
Meanwhile, uncertainty around ongoing U.S.-China trade negotiations is also influencing market sentiment. Talks set for this weekend in Geneva are being described as a “total reset” in trade relations. A positive outcome could ease global financial stress, boost U.S. equity indices such as the Dow, S&P 500, and Nasdaq, and stabilize the U.S. dollar above 100 — a scenario that could lend further support to oil prices.
Despite OPEC’s phased supply return being mostly priced in — with recent price action reflecting a test of the $55 level — further developments could add volatility. Technical indicators show that oil has bounced twice from the $55 level, which corresponds with the 0.618 Fibonacci retracement of the 2020–2022 uptrend. The market is now testing the 0.618 extension near $61.25.
A solid hold above this level could pave the way for a continued rally, with resistance seen at $64.80, $67.80, and $71.30. However, if oversupply concerns return — especially if U.S.-China tariff disputes remain unresolved — a break below $58 and $55 could send prices sharply lower, possibly toward $49. This would align with the lower boundary of the long-term rising channel established since the lows of 2020.
In addition, upcoming U.S. Consumer Price Index (CPI) data may impact Federal Reserve expectations and the strength of the dollar. While Fed Chair Jerome Powell has kept rates steady and expressed confidence in the economy, any surprise in inflation could trigger renewed market volatility.
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