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Oil rises after Israel’s attack in Qatar

• Israel attacked Hamas leadership in Qatar
• Trump asked the EU to apply secondary tariffs to buyers of Russian oil
• Increased supply and slowing US growth keep the outlook bearish
• Oil recovers from 61.50, testing the 20 SMA resistance

Oil prices are rising after Israel attacked Hamas leadership in Qatar, and President Trump asked Europe to impose tariffs on buyers of Russian oil. However, the weekly market outlook is capping the upside.

Oil prices are rising, and there is an increase in the geopolitical risk premium following Israel's unprecedented attack in Doha. This increase is of concern over short-term supply, especially if OPEC+ oil production facilities are caught in the crossfire.

The price reaction was relatively muted Following reassurances from the US that there would not be a repetition on Qatari soil and as there was no immediate impact on oil supply.

Trump has urged the EU to impose 100% tariffs on China and India as a strategy to pressure Putin towards peace in Ukraine. The expansion of secondary tariffs to other major buyers could disrupt Russian crude exports and tighten supply. This would be bullish for oil prices. However, there is a level of scepticism over how far the trump administration or the EU would go, especially as higher oil prices would stoke inflation.

Meanwhile, the outlook for oil remains bearish. The US Energy Information Administration warned global crude prices could be under significant pressure in the coming months due to rising inventories as OPEC+ increases output. This could be further fueled by the slowing growth in the US.
 

Oil forecast -technical analysis

Oil trades within a descending channel dating back to 2023. The price also trades below its 20, 50, and 200 SMA in a bearish trend.  Oil faced rejection at the 50 SMA and rebounded lower before finding support at 61.50, the August low. The price has recovered higher and is testing the 20 SMA resistance and the mid-point of the descending channel.

Buyers will need to retake this resistance at 63.50 to extend gains towards 65.00, the 50 SMA, and the September high. A rise above here creates a higher high and exposes the 200 SMA.

Sellers will need to break below 61.50 to create a lower low and extend the bearish trend.
 

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FTSE rises for a third day

• FTSE rises despite growing concerns ahead of November’s budget
• Anglo American extends gains after Teck Resources deal
• AB Foods and Vistry fall
• FTSE is guided higher by the 20 SMA

The Footsie is pushing modestly higher on Wednesday, looking for a third straight day of gains even as clouds are forming on the horizon surrounding the UK economy.

While Q2 GDP was stronger than forecast and PMI data was also upbeat in August, the mood is turning cautious as attention moves towards the Chancellor’s Autumn budget. According to Goldman Sachs, Chancellor Rishi Sunak will implement significant tax increases. However, the UK has had limited historical success in repairing public finances through tax hikes.

The UK is in a strained fiscal position after the welfare reforms were abandoned earlier this year and amid a backdrop of sluggish growth, persistent inflation, and rising borrowing costs.

The FTSE is comprised of many defensive stocks, which often perform well in a downturn. These sectors include utilities, consumer staples, healthcare, and pharmaceuticals, as well as telecommunication stocks.

Anglo American is helping the charge higher, adding 2.5% to yesterday's 9% surge after agreeing to merge with Canada's tech resource, in a deal worth $50 billion, the second largest mining merger in history. Two firms will join to forge a new global copper-focused heavyweight.  Copper is used in power and construction sectors but is also benefiting from the huge demand spurred by EVs and AI data centres.

Primark owner AB Foods is under pressure, falling 9% after weak sugar profits and disappointing Primark sales. Vistry Group is also under pressure after cautioning that housing demand remains vulnerable to wider economic pressures.
 

FTSE forecast – technical analysis

The FTSE ran into resistance at 9360, its record high, before rebounding lower to 9100. The price has recovered from this low and it is grinding higher, guided by the lower band of the rising channel and the 20 SMA. The FTSE trades at 9270 at the time of writing.

Buyers will look to extend gains towards 9360 and fresh record highs.

Minor support is at 9200. Below here, the 50 SMA comes into focus at 9100. A break below 9050 and 9000 opens the door to 8890. A break below here negates the longer-term uptrend.

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