Oil prices moved lower on Thursday after Israel and Lebanon agreed to a ceasefire, boosting expectations that broader diplomatic progress in the Middle East could eventually ease tensions involving Iran and reopen key oil shipping routes.
The development reduced some of the geopolitical risk premium that had pushed crude prices higher earlier this week.
KEY DETAILS
Brent crude futures fell 87 cents, or 0.89%, to $96.92 per barrel by 0458 GMT. U.S. West Texas Intermediate (WTI) crude dropped 78 cents, or 0.81%, to $95.24 per barrel.
The decline followed news that Israel and Lebanon had agreed to implement a ceasefire late Wednesday. The agreement increased hopes for renewed progress between Washington and Tehran, with Iran previously linking broader negotiations to an end to fighting between Israel and Lebanon.
U.S. President Donald Trump said there could be movement in talks with Iran as soon as this weekend.
Iranian Foreign Minister Abbas Araqchi said communication with Washington remains open, although negotiations have yet to produce concrete results.
Meanwhile, political pressure is growing in Washington. The Republican-led House approved a resolution seeking to block continued U.S. military involvement against Iran, though the measure still faces Senate approval and a likely presidential veto.
On the supply side, the U.S. Energy Information Administration reported an 8 million-barrel decline in crude inventories, bringing stockpiles down to 433.7 million barrels. Analysts had expected a draw of around 4 million barrels.
MARKET REACTION
Oil markets reacted to the reduced risk of supply disruptions in the Middle East, particularly around the Strait of Hormuz. Brent and WTI had both gained roughly 2% on Wednesday amid escalating regional tensions.
Despite Thursday's decline, analysts continue to see support for prices due to tightening inventories and strong seasonal demand.
WHY IT MATTERS
For traders, the focus remains on Middle East diplomacy and the future of oil flows through the Strait of Hormuz. Any breakthrough in U.S.-Iran negotiations could ease supply concerns, while continued inventory declines may keep upward pressure on prices.
CONCLUSION
Markets will closely watch upcoming U.S.-Iran discussions, developments surrounding the ceasefire, and inventory trends heading into the peak summer demand season. While tensions appear to be easing, supply risks remain a major driver for energy markets.
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