WTI Oil Prices Move Above $100 on Iran War Games, CAD to Benefit?

Oil prices broke above the $100 a barrel level today, pushing above the resistance we saw in Friday's trading session.
The reason for the jump higher were rising tensions in the Middle East on the back of Iranian war games as well as an admission by Syria that they have cut their oil production as a result of sanctions by European countries.

From Financial Times: "Sufian Alao, Syrian oil minister, revealed over the weekend that Damascus had cut oil production to 260,000 barrels a day, down from a pre-crisis level of 380,000 b/d.
The Syrian oil disruption is relatively small, but oil traders are worried about the potential for a much larger outage involving Iran, the world's third-largest oil exporter. The European Union is discussing a potential oil embargo on Tehran and Iran has staged naval war games in the Strait of Hormuz."

Iranian War Games In Strait of Hormuz

The threat by European nations to impose an oil embargo on Iran has increased tensions and oil prices should remain supported as a result. The wargames by Iran will run for 10 days and started on Saturday.

From National Post: "Admiral Habibollah Sayyari, head of Iran's navy, said submarines, destroyers, missile-launching ships and attack boats will occupy a 2,000-kilometre stretch of sea from the Strait of Hormuz, at the mouth of the Persian Gulf, to the Gulf of Aden, near the entrance to the Red Sea…

Iran said the war games would be held in international waters…
Closing the Strait for just 30 days would send the price of crude racing up to US$300 to $500 a barrel, a level that would trigger global economic instability and cost the U.S. nearly US$75-billion in economic activity…

"Considering Washington's more general - and fundamental - interest in securing freedom of the seas, the U.S. Navy would almost be forced to respond aggressively to any attempt to close the Strait of Hormuz."

But Mr. Cordesman also warned "Iran could not ‘close the Gulf' for more than a few days to two weeks even if it was willing to sacrifice all of these assets, suffer massive retaliation, and potentially lose many of its own oil facilities and export revenues.""

Higher Oil Benefits Canadian Dollar

One currency that certainly has a chance to rally from higher oil is the Canadian dollar.
The USD/CAD has receded from the 1.0415 level on December 19th down to 1.0190 in today's trading, remaining below the 200 EMA in the hourly timeframe in using currently the 55 EMA (dark blue) as resistance. The pair trades at the 61.8% retracement of the 3670 pip upmove from December 8th to 19th, and a push lower opens up the 1.0130 and 1.0050 levels to the downside.

Any actual provocation with Iran and the US however would likely result in strong flows towards the USD as investors would seek safe-haven, but a gradual climb of oil on the back of tensions can favor the Loonie.
While price action in today's session was rather subdued and within the range we had seen to end last week, we have highlighted how the Canadian dollar may be able to start off the first quarter on a strong note if we have tentative risk on sentiment as well as growth divergence in North America - better-than-expected data from the US.