Crude oil prices have found a precarious equilibrium this week, as the market balances a sharpening geopolitical risk profile against a deteriorating fundamental backdrop. While benchmark Brent remains supported by diplomatic friction in the Persian Gulf, a looming wave of global supply threatens to cap further gains for energy-sensitive portfolios.

The Strait of Hormuz and the “Flight to Safety”

The immediate driver for price support is a recent U.S. Department of Transportation advisory urging American-flagged vessels to stay close to Omani territorial waters while transiting the Strait of Hormuz. This alert has re-injected a “war premium” of approximately $4–$7 per barrel into front-month futures. For the Israeli institutional investor, this volatility is more than just a global macro indicator; it directly influences the local Consumer Price Index (CPI) through refined product imports and shipping costs. Despite ongoing indirect talks in Muscat, the market remains “locked and loaded,” pricing in the possibility of physical disruptions to the 20% of global petroleum liquids that flow through this chokepoint.

Fundamental Headwinds: The 4 Million Barrel Surplus

Contrasting the headline-driven spikes is a sobering reality: the International Energy Agency (IEA) projects a record global glut of nearly 3.8 million barrels per day in 2026. This surplus is being fueled by surging production in Guyana, Brazil, and the United States, even as OPEC+ maintains its output freeze. Brent’s prompt spread remains in backwardation—a sign of near-term tightness—but the long-term curve suggests that without a sustained conflict, prices could gravitate back toward the $60 handle by mid-year.

Strategic Implications for the Tel Aviv Exchange

In the local context, the stability of oil prices is a double-edged sword for the Israeli economy. While higher prices bolster the valuation of regional energy infrastructure and natural gas exports from the Leviathan and Karish fields, they also exert downward pressure on the Shekel. Sophisticated traders are currently monitoring the 10-day correlation between Brent crude and the USD/ILS exchange rate; historically, spikes in regional risk lead to a stronger Dollar, potentially offsetting gains for local equity holders.

Looking forward, the critical levels to watch are $71.00 (resistance) and $64.50 (support) for Brent. Investors should monitor the upcoming February 11 summit between U.S. and regional leaders, as any de-escalation in maritime rhetoric could see the “war premium” evaporate quickly, leaving the market to face the gravity of its own oversupply. Pay close attention to the Friday CPI data out of the U.S., as it will dictate the Dollar’s strength and, by extension, the purchasing power of energy importers in the Middle East.