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Oil spiked on fake news—but didn’t fall when the story unraveled. That reaction says more about the market than the headline itself, pointing to strengthening underlying demand and persistent supply risks. With Brent crude now clearing the $106 level, attention shifts to resistance near $110, where a break could pave the way for a retest of the $120 highs seen at the onset of the Iran war.

The false headlines claiming explosions in Tehran, driven by viral social media posts using AI-generated or recycled footage, briefly suggested that the ceasefire had collapsed. Yet the critical takeaway is not the spike itself, but the aftermath. Once these claims were debunked, oil failed to retrace meaningfully. This lack of reversal suggests that underlying bullish pressure is building, independent of headline noise.

The key driver remains the unresolved situation in the Strait of Hormuz. Despite the extension of the ceasefire, the situation in the Strait remains tense. Reports of ongoing military activity in the Gulf highlight the fragility of the current arrangement. The ceasefire is more a pause than a resolution.

At the center of the issue is a fundamental disagreement between the US and Iran. Washington maintains that its naval blockade of Iranian ports is an enforcement of sanctions, while Tehran views it as a direct act of war. This divergence ensures that the risk surrounding roughly 15 million barrels per day of oil transit through the Strait remains firmly in place.

This backdrop is forcing a repositioning in the market. Traders who had anticipated a de-escalation and reduced exposure are now returning, driven by fears of prolonged supply disruptions. The shift from “selling the news” to rebuilding long positions is amplifying the upward move.

Technically, Brent’s break above 106.10 resistance marks a key turning point. The earlier decline from 114.81 appears to have bottomed at 87.79, and the trend is now shifting higher, supported by strong momentum. The bias has now shifted back to the upside, with prices expected to extend higher as long as 97.58 support holds.

The next key level to watch is the near-term channel resistance around 110.98. A decisive break above this zone would open the path toward a retest of the 119.70 high.

Japan’s private sector growth softened in April despite a sharp surge in manufacturing activity. PMI Composite slipped from 53.0 to 52.4, marking a four-month low, as weakness in services offset strong gains in the factory sector.

Manufacturing was the clear standout. PMI Manufacturing jumped from 51.6 to 54.9, while output rose from 52.1 to 55.4, the strongest pace in over a decade. Firms reported a solid pickup in new orders, with some boosting production preemptively amid concerns over supply chain disruptions linked to the Middle East conflict.

In contrast, services lost momentum, with PMI falling from 53.4 to 51.2. Slower growth in activity and sales points to softening domestic demand, creating a divergence between external-facing manufacturing strength and more fragile services conditions.

At the same time, inflation pressures are building rapidly. Input costs rose at the fastest pace since January 2023, driven by higher fuel, energy, and raw material prices, alongside a weaker Yen. Firms passed on these costs aggressively, with output prices rising at the fastest rate on record. Despite the manufacturing strength, business confidence dropped to its lowest since August 2020, highlighting concerns that current momentum may prove unsustainable.

Full Japan PMI flash release here.

Australia’s private sector returned to modest growth in April, with the S&P Global Flash Composite PMI rising from 46.6 to 50.1, just crossing back above the expansion threshold. The improvement was driven by a sharp rebound in services, where PMI jumped from 46.3 to 50.3, signaling stabilization after March’s contraction.

However, the recovery remains uneven. Manufacturing PMI rose from 49.8 to 51.0, back into expansion territory, but output within the sector fell further from 49.4 to 48.2. This divergence suggests that while sentiment and headline activity improved, actual production conditions remain under pressure, reflecting ongoing disruptions in supply chains.

Cost pressures are intensifying. Input price inflation accelerated for a third consecutive month, reaching its highest level since August 2022, driven largely by higher fuel and shipping costs linked to the Middle East conflict. Businesses are passing on part of these increases, with output prices rising at the fastest pace in three-and-a-half years.

Overall, the data points to a fragile recovery. Services are providing near-term support, but manufacturing remains constrained, and inflation pressures are building again.

Full Australia PMI flash release here.