Ever since the US and Israel launched strikes against Iran a week ago, traffic in the vital Strait of Hormuz has ground to a halt. One-fifth of the world's oil goes through the strait. Even though Iran hasn't formally closed it, ships began piling up on both sides of it after insurers stopped assuming the risk. As a result, the price of crude oil shot up 35% last week, its biggest weekly gain since futures trading began in 1983.
Trump and Netanyahu caught the entire world off guard when they attacked Iran as negotiations about the Islamic Republic's nuclear program were still ongoing. So the war itself came as a shock to all except the two presidents' inner circles and military. The following surge in crude oil prices, however, did not. In fact, the Elliott Wave patterns had set the stage for a notable rally more than a month earlier.
This chart was included in our Elliott Wave Pro analysis of Crude Oil published before the markets opened on January 26th. It revealed that the recovery from the pandemic low in 2020 up to the Ukraine war spike in 2022 was a five-wave impulse pattern, marked I-II-III-IV-V. According to the theory, a three-wave correction follows every impulse.
Here, WTI crude oil fell by nearly 60% to $55 a barrel by December, 2025, in what looked like a simple A-B-C zigzag. Wave 4 of A was a running flat, while wave B was an a-b-c-d-e triangle. There are patterns in the Elliott Wave catalogue which should only be considered when nothing else makes sense. Namely, expanding diagonals, whether leading or ending, can turn out to be double or triple zigzags, or simply evolve into the more common contracting type. That's why we usually don't trust the analysis much if it involves an expanding diagonal.
In the case of WTI crude oil, however, after seeing the problems the bears have been having with the 61.8% Fibonacci support, we thought "what else could it be?" So in late January, more than a month before the war in Iran began, we marked wave C as a complete expanding ending diagonal and prepared for higher prices going forward.
Over the following six weeks, WTI crude oil jumped 50% from $61.30 to over $92.50, its highest level since September 2023. Prior to this surge, almost everyone was bearish on oversupply fears. Elliott Wave analysis allowed us to take a contrarian bullish position a month in advance, putting us ahead of the events which forced everyone else to follow suit.
Needless to say, we've no idea how the conflict in the Middle East is going to unfold, nor when it is going to end. But the Elliott Wave patterns are already giving a hint of how high crude oil prices can go.