Discover how expansionary US foreign policy is reshaping energy sector momentum and creating asymmetric trade opportunities. We examine the technical "Double Bottom" formation in WTI Crude, the bearish breakdown of USD/CAD as oil correlations tighten, and the bullish acceleration of Chevron (CVX) following its Q4 earnings beat.
Key takeaways
- Geopolitical risk premiums surged into 2026, driven by a more confrontational US foreign policy, spanning Venezuela, NATO tensions, and escalating US–Iran risks, raising the probability of broader Middle East instability.
- Strait of Hormuz risk is rising fast, with prediction market-implied odds of a closure in 2026 jumping to 36.5%, a scenario that would materially disrupt global oil flows.
- WTI crude oil is showing a major bullish base, having stabilized around $55, broken above its 200-day moving average, and potentially forming a multi-month double bottom, with higher resistance levels in focus if momentum holds.
- Energy-linked trades are gaining traction, with USD/CAD breaking down alongside rising oil prices and Chevron (CVX) exhibiting potential bullish acceleration and relative strength as US energy stocks outperform the broader S&P 500.
The defining theme of January 2026 was a sharp rise in geopolitical risk premiums, driven by an increasingly expansionary and confrontational foreign policy stance from the US White House.
Under directives from President Trump, US actions in Venezuela, culminating in the removal of President Maduro and the seizure of key oil assets, marked a major escalation in US interventionism. This was followed by renewed tariff threats against NATO allies amid disputes over their resistance to US strategic ambitions in Greenland, drawing criticism from several NATO leaders who warned that Washington was pushing toward a new global order at odds with NATO’s founding principles.
The most recent flashpoint has been Trump’s on-and-off threat of military action against Iran, framed around potential regime change following rising civil unrest in Tehran. Last week’s order for US warships to assemble en masse in the Persian Gulf has materially raised the risk of miscalculation, reinforcing concerns over a broader destabilisation of the Middle East.
Against this backdrop of escalating US-Iran tensions and a renewed geopolitical risk, we highlight three instruments to watch in February: West Texas Oil, USD/CAD, and Chevron Corporation, a selected US energy stock, each offering potential asymmetric exposure to rising geopolitical premiums and strengthening momentum dynamics.
Closure of the Strait of Hormuz
Fig. 1: Probability that Iran will close the Strait of Hormuz in 2026 as of 1 February 2026 (Source: Polymarket, MacroMicro).
According to the International Energy Agency (IEA), a quarter of the world's maritime oil trade and a fifth of the LNG trade must pass through the Strait of Hormuz, making it one of the most critical maritime energy chokepoints globally.
The Strait of Hormuz is located between Oman and Iran. One of Iran's retaliation methods in the event of a US attack is to shut down the Strait of Hormuz to disrupt the flow of energy supplies.
Based on the latest data from the prediction market platform Polymarket as of 1 February 2026, as compiled by MacroMicro, the probability of Iran closing the Strait of Hormuz in 2026 has increased significantly to 36.5% from 15% at the start of January 2026 (see Fig. 1).
If the Strait of Hormuz is being forcefully closed by Iran, it may lead to a potential major disruption of oil supplies, in turn, putting upward pressure on oil prices.
West Texas Oil has evolved into a potential major bullish basing formation
Fig. 2: West Texas Oil CFD medium-term trend as of 30 Jan 2026 (Source: TradingView).
The prior 6-month decline of 30% in the West Texas Oil CFD (a proxy for WTI crude oil futures) from the 23 January 2025 high to the 16 December 2025 low has stabilized at US$55.00, which coincides with the 9 April 2025 low of US$55.23.
Thereafter, its price action staged a 20% rally, clearing above its key 200-day moving average and closing at US$65.81 on Friday, 30 January 2026. These observations suggest that the West Texas Oil CFD may have formed a multi-month “Double Bottom” configuration, a major bullish basing formation (see Fig. 2)
Watch the key medium-term pivotal support at US$59.00 (also the 50-day moving average), and a clearance above US$71.30 (neckline resistance of the “Double Bottom and major descending resistance from 28 September 2023 high) may see the next medium-term resistances coming in at US$75.55 and US$80.30.
On the other hand, a break and daily close below US$59.00 invalidates the bullish scenario to expose the major range support of US$55.00 in the first step.
USD/CAD’s potential transformation into a major downtrend phase
Fig. 3: USD/CAD medium-term trend as of 30 Jan 2026 (Source: TradingView).
Fig. 4: Correlation of WTI crude with USD/CAD (inverse) as of 30 Jan 2026 (Source: TradingView).
The price actions of USD/CAD have staged a bearish breakdown below its former major ascending support drawn from the 25 September 2024 swing on Tuesday, 27 January 2026 (see Fig. 3).
In addition, the movement of the USD/CAD (inverse) has moved in direct synchronization with the trend of the WTI crude oil, where the 20-day rolling correlation coefficient has increased to 0.73 as of Friday, 30 January 2026 (see Fig. 4).
Hence, if WTI crude oil continues to rally, the CAD may see further appreciation against the US dollar.
Watch the 1.3940 key medium-term pivotal resistance on the USD/CAD. A break below 1.3370 may expose the next medium-term supports at 1.3220 and 1.3090.
However, a clearance and a daily close above 1.3940 invalidates the bearish scenario for the next medium-term resistances to come in at 1.4140 and 1.4300
A potential bullish acceleration trend for Chevron Corporation (CVX)
Fig. 5: Monthly performances of the 11 SPDR US sectors & S&P 500 as of 30 Jan 2026 (Source: MacroMicro).
Fig. 6: Chevron Corp (CVX) medium-term trend as of 30 Jan 2026 (Source: TradingView).
US energy stocks have kicked off 2026 with strong bullish momentum, underpinned by a firming oil price environment. Within the 11 sectors of the S&P 500, the SPDR Energy ETF (XLE) emerged as the top performer in January 2026, rallying 14.2% and decisively outperforming the broader index’s modest 1.4% gain (see Fig. 5).
Chevron Corporation (CVX) has been a key beneficiary of this sectoral strength, pushing to a fresh all-time closing high of $176.90 on Friday, 30 January 2026. The move was reinforced by a solid earnings beat, with Q4 EPS of $1.52 exceeding consensus expectations of $1.41, with a 7.8% upside surprise.
The price actions of Chevron have staged a bullish breakout above the upper boundary of its medium-term ascending channel on 29 January 2026.
In addition, the volatility-adjusted relative strength (VARS) of Chevron against the SPDR Energy sector exchange-traded fund (XLE) has started to turn up (shaped a “higher low”) above its 50-day moving average and inched back up above its zero line. These observations suggest that Chevron has started to show potential relative strength against the Energy sector (see Fig. 6).
Watch the 165.94/163.27 key medium-term pivotal support on Chevron for the next medium-term resistances to come in at 181.13/181.52, 185.22/186.06, and 191.83/193.42 (Fibonacci extension clusters)
On the flip side, a break and a daily close below 163.27 jeopardises the bullish tone to expose the next medium-term supports at 156.84 (also the 50-day moving average), and 149.52 (also the 200-day moving average).
The information presented is historical information, and past performance is not indicative of future performance.
