The media runs with it. Politicians hold press conferences. Analysts start calculating how much lower oil should go if everything works out.
Then reality shows up.
This week President Trump said he expects a broader agreement with Iran over the next week and suggested progress is being made toward reopening the Strait of Hormuz. On the surface, that sounds bullish for global stability and bearish for energy prices.
The problem is that Iran appears to disagree.
Iranian state media quickly pushed back, saying communications with the United States have effectively stalled and that negotiations surrounding a memorandum of understanding have gone nowhere for days. At the same time, reports continue to emerge from Lebanon showing that despite the headlines, violence has not disappeared. Rockets are still being fired. Airstrikes are still occurring. Soldiers and civilians are still getting hurt.
In other words, the headlines are telling us one story.
The market is telling us another.
Watch What Oil Is Doing, Not What Politicians Are Saying
The chart above is what matters.
For nearly four years crude oil has been fighting with the same resistance zone around $93. Every major rally eventually stalled at that level. Every breakout attempt failed and sent prices lower.
Markets remember important levels. Traders remember them too.
That is why this area matters so much.
What catches my attention is not that oil rallied into resistance. What catches my attention is that it broke through it and continues to hold near the breakout level despite a constant stream of supposedly bearish news.
Think about that for a moment.
If traders genuinely believed that the Middle East situation was solved, that a lasting ceasefire was around the corner, and that Hormuz would be fully reopened without issue, oil should be getting crushed.
Instead, buyers continue to show up.
Every pullback gets bought.
Every dip is met with demand.
The market has had multiple opportunities to break lower and it simply refuses to do so.
That is usually a sign that something bigger is happening beneath the surface.
The best trends often climb a wall of worry. They advance while investors spend all of their time explaining why they should not.
Energy has been doing exactly that.
Price Is the Truth Detector
One of the most important lessons I have learned over the years is that politicians can say whatever they want.
The news can report whatever it wants.
Experts can debate whatever they want.
Price gets the final vote.
Price is the ultimate truth detector.
When I look at this chart, I don’t see a market preparing for peace. I see a market that is pricing in continued uncertainty. I see a market that understands how fragile the situation remains. I see a market recognizing that one missile, one drone strike, one failed negotiation, or one escalation can completely change the outlook overnight.
The Strait of Hormuz remains one of the most important energy chokepoints on the planet. Roughly a fifth of the world’s oil supply moves through that narrow passage. Any disruption matters. Even the threat of disruption matters.
That is why I continue to believe investors are underestimating the potential for higher energy prices.
Could we get a temporary agreement? Sure.
Could we get a few weeks of reduced tensions? Absolutely.
But those are very different things from a durable solution.
The fighting in Lebanon continues. Negotiations remain fragile. Iran and the United States are still far apart on key issues. The market knows this.
That is why crude oil is sitting near multi year highs instead of collapsing.
As traders, our job is not to predict the next headline. It is not to guess what politicians will do tomorrow.
Our job is to listen to the market.
And right now the market is speaking very clearly.
Energy remains one of the strongest trends in the world.
The breakout above $93 is one of the most important developments in the commodity complex, and until proven otherwise, I believe higher prices remain the path of least resistance.
Stay ready for volatility.
Stay focused on the trend.
Because despite all the talk of peace, the market is telling us this story is far from over.
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