Oil Prices Retreat from Recent Rally Despite Middle East Tensions

Oil prices extended losses for the second day, erasing most of Monday's rally despite geopolitical tensions in the Middle East.

If tensions between Israel and Iran escalate, oil prices could rally violently, especially if Iran closes the Strait of Hormuz.

From a technical perspective, oil prices have fallen toward an important support level near $83. A break below $82 could lead to a drop to $77.50.

If WTI resumes its rebound, initial resistance is at $85. A successful breakout could bolster bullish momentum toward $87.25 and $88.40.

Traders must watch the evolving Middle East geopolitical situation closely. Further escalation that draws in the U.S. could be very bullish for oil.