Forex Today: WTI Crude Oil >$105 on Hormuz, Gulf, Energy Attacks

Crude Oil and petroleum products saw further huge price jumps as markets opened afraid of disruption to oil supplies in the Gulf.

1. The number one item driving the biggest movements in markets as the new week gets underway is the war between the USA and Israel on one side and Iran on the other side. Both sides have escalated their rhetoric, and recent days have seen attacks by both sides against oil storage facilities, which has escalated into today's Iranian strike on the main oil refinery in Bahrain. The USA is signalling the war will last another 6 weeks and Iran is continuing to attack its neighbours, notably the U.A.E. President Trump is calling for unconditional surrender and a veto over the eventual Supreme Leader or similar in Iran, while the Islamic Republic has formally selected the assassinated Supreme Leader Khamenei's son, Mojtada Khamenei, as the successor, who is believed to have hard line opinions.
2. The most immediate and dramatic effects of this war on the market are the soaring prices of energy products:
   1. WTI Crude Oil derivatives spiked as high as $120 in Asian session trading today before falling back to trade slightly above $105 which is still a 15% increase from Friday's close at $91. This is a 3.5-year high price.
   2. Practically the same thing happened to Brent Crude, which usually differs only a little in price from WTI.
   3. RBOB Gasoline futures also spiked to a dramatic 3.5-year low before falling back, mirroring the price movements in crude oil.
3. Trend traders will likely still be long of crude oil, gasoline, and possibly other crude oil derivatives, but a lot of mental strength will have to go into not being shaken out and sticking to the stop loss policy. Markets like these can see huge evaporation of floating profits before an end of day trade exit.Typically with spikes as we have already seen today, the trade is already practically over.
4. The soaring price of crude oil and gasoline will be a major headache for President Trump, as it will probably be the main thing which pressures American public sentiment to be more against the war. The President tried to strike a reassuring tone today as he reminded the public that these price rises were temporary and will soon be over ("Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace. ONLY FOOLS WOULD THINK DIFFERENTLY!"). Another market calming measure which is being taken is today's scheduled G7 discussion which may result in the release of the G7's emergency oil reserves, which could calm the market and further dampen the price after its rapid decline from $120.
5. The escalation of the war and the dramatic increases in energy prices have sent stock markets heavily lower. If we do not see dramatic recoveries in stock markets today, we will see trend following institutions exiting long trades in these equity market indices.
   1. The S&P 500 Index is down by more than 1.5% from Friday's close, trading at a fresh 3-month low.
   2. Exactly the same as a) is true about the NASDAQ 100 Index.
   3. The Chinese HSI is down by more than 1.5% from Friday's close, and reached a new 6-month low price earlier before recovering somewhat.
   4. The Japanese Nikkei 225 Index s down by more than 5% today.
   5. The German DE30 is down by more than 3% and traded earlier at a fresh 10-month low.
6. In the Forex market, the strongest major currency since today's Tokyo open has been the Canadian Dollar (as an oil-linked commodity currency), while the weakest has been the Swiss Franc. .
7. Wheat futures have made a strong bullish breakout, reaching a new 1.5-year high price earlier today before giving up most of the day's gains, with the spike bursting at the same time as crude oil. Trend traders may be going long of wheat today. If you want to do that but can't afford the expensive Wheat futures, there is a Wheat ETF called WEAT that could give you exposure to the grain.
8. There are no high-impact data releases scheduled for today. However with the dramatic events in the energy markets, it is still likely to be a day of unusually high volatility.