Crude Oil Unfolds A Bullish Five-Wave Structure On Middle East Escalation, But Watch For A Corrective Slowdown

Crude oil keeps pushing higher following the latest escalation between the US and Iran. In fact, Iran has reportedly attacked Saudi Arabian tankers, triggering another intraday rally in crude oil above the $90 mark.

It really seems like we could be approaching fifth-wave targets here, but it remains to be seen whether wave five will extend further or whether the market will start to slow down. One thing is certain — the current structure still points to a bullish pattern.

We expect more upside after any meaningful ABC retracement, but it remains to be seen when that pullback will occur and how deep it will be. A corrective slowdown would be a normal part of the bullish cycle rather than an immediate trend reversal.

Whenever it does appear and brings crude oil back to more attractive levels, we will be looking for another fresh rebound and a potential continuation of the larger uptrend.

According to Elliott Wave Theory, a bullish impulse typically consists of five waves (1-2-3-4-5) in the direction of the larger trend. Some key guidelines are that wave 2 cannot retrace beyond the start of wave 1, wave 3 is usually the strongest wave but cannot be the shortest among waves 1, 3, and 5, and wave 4 generally should not overlap with wave 1 unless the structure develops as a diagonal. After a complete five-wave impulse, the market usually enters an ABC corrective phase, where waves A and C move against the previous trend while wave B acts as a temporary rebound.