Go long on Brent crude with $95 in sight

The Federal Reserve's (Fed) July meeting and Kevin Warsh's hawkish posture have recently set a challenging scene for commodities. Typically, a rising dollar and higher borrowing costs spell trouble for raw materials. However, geopolitical tensions and a genuine supply crunch have taken center stage, causing Brent crude to play by its own rules right now.

The regulator's tough talk and the Middle East's rising temperature have combined to produce a complicated but ultimately bullish cocktail for energy costs. And the catalysts keep stacking up.

In fact, the spark came from new US military strikes on Iranian targets, which reignited fears of a Strait of Hormuz blockade. Since about one-fifth of the world's oil passes through this narrow waterway, traders wasted no time adding a $5–$7 per barrel risk premium to fuel prices. 

At the same time, American crude stockpiles are thinning, pointing to solid consumption during the peak summer driving season. OPEC+ producers, for their part, have remained disciplined, keeping output in check and limiting new supply to the market. 

The central bank's official statement even acknowledged "price shocks in the energy sector"—a rare nod to the fact that this shortage is structural, not something monetary policy can easily fix. This admission is telling: it suggests that even the Fed recognizes the limits of its own tools. 

That said, Chairman Warsh's uncompromising stance and the FOMC's internal rift mean US rates will stay higher for longer than many had hoped. On the one hand, this is a drag on global economic momentum and a brake on long-term energy demand. On the other, a strengthening dollar makes oil more expensive for buyers using other currencies. These are genuine headwinds that shouldn't be ignored. 

Add to that China's property crisis and Europe's industrial stagnation—with the eurozone GDP forecast limping along at a mere 0.8%—and you have powerful forces capping Brent's upside.

Still, as long as Middle East tensions persist and supply remains tight, crude is likely to hold a bullish bias. The Fed can slow the pace of the rally, though it can't eliminate the geopolitical risk premium. In other words, the upside momentum is resilient. So, expect oil to consolidate in the $85–$95 range, with buyers maintaining the upper hand. 

All things considered, the fundamental picture favors bulls. The geopolitical deficit outweighs all monetary headwinds, making fuel a compelling medium-term investment.

The ultimate recommendation is to buy Brent crude. Lock in profits at $95. Place Stop Loss at $85.

Calculate your open position so that a potential loss (protected by a Stop Loss order) is limited to 1% of your deposit. If your account balance does not allow you to enter a position of this size, it is better to skip the trade and wait for other market signals that meet low-risk criteria.