For the third consecutive day, West Texas Intermediate (WTI) crude oil is attracting buyers. Currently, the commodity is trading slightly above the key psychological level of $68.00, having gained over 1.25% on the day, and appears poised for further upside due to escalating tensions in the Middle East.

The worsening regional conflict, including U.S. President Donald Trump's threats against Yemeni Houthis if they continue attacks on ships in the Red Sea, has heightened concerns about potential supply disruptions. Trump has also warned that Iran will be held accountable for any further attacks, which supports oil prices amid supply risks.

Additionally, Israeli airstrikes in Gaza have ended weeks of negotiations over a potential ceasefire, adding another layer of geopolitical uncertainty, which further drives oil prices higher.

Market optimism regarding China's stimulus measures is also boosting oil demand expectations. A special action plan announced by China's State Council, aimed at stimulating domestic consumption and increasing household incomes, could drive fuel demand in the world's largest crude importer, providing additional upward potential for oil prices.

However, negative factors should also be considered, such as the OECD's downward revision of global growth forecasts, driven by concerns over Trump's trade tariffs, which could pressure energy demand.

Traders and investors should exercise caution ahead of the Federal Reserve's interest rate decision on Wednesday, as monetary policy shifts could significantly impact short-term oil price movements, particularly in relation to fluctuations in the U.S. dollar.

Technical Outlook

Overall, the combination of geopolitical risks and economic factors is creating an intriguing market setup for oil.

From a technical perspective, WTI is currently testing key resistance near $68.25. A decisive breakout above this level would pave the way for a rally toward the psychological level of $70.00. However, daily oscillators have yet to turn positive, suggesting that it may still be too early to call for a sustained bullish trend.

On the other hand, any pullback could lead to a retest of multi-month support levels, with several minor hurdles along the way before a deeper correction unfolds.