Oil falls as Israel-Lebanon ceasefire eases Gulf risk
Oil prices fell Thursday after Israel and Lebanon agreed to implement a ceasefire, raising hopes that wider diplomacy involving the United States and Iran could regain momentum. The pullback partly reversed this week’s rally, though traders remained cautious because the Strait of Hormuz remains central to global supply risk.
Highlights
- Israel and Lebanon agreed to implement a ceasefire, easing some geopolitical pressure on oil.
- WTI fell to $95 a barrel, while Brent slipped to $97 a barrel.
- U.S.-Iran talks remain uncertain, but both sides say contacts have not fully stopped.
- U.S. crude inventories fell by 8 million barrels last week, keeping supply concerns alive.
Ceasefire hopes weigh on crude
West Texas Intermediate crude traded at $95.07 a barrel, down 1.0%, while Brent fell 1.09% to $96.74 as the market reacted to the Israel-Lebanon ceasefire announcement.
Reuters reported the move followed sharp gains on Wednesday, when both benchmarks rose about 2% after renewed hostilities in the Gulf, including Iranian attacks on Kuwait and U.S. military strikes near the Strait of Hormuz. The ceasefire deal reduced immediate fears that the Lebanon front would derail U.S.-Iran talks, which Tehran has partly tied to an end to fighting between Israel and Lebanon.
Diplomacy still looks fragile
President Donald Trump said Wednesday that progress in talks with Iran could come as soon as this weekend. Iranian Foreign Minister Abbas Araqchi said contacts with Washington had not been cut off, but added that negotiations had made no progress and that both sides were still reviewing exchanged texts.
In Washington, the Republican-led House approved a resolution seeking to block Trump from continuing the war against Iran. The measure would still need Senate approval and enough support in both chambers to override an expected presidential veto.
Tight inventories limit the downside
The ceasefire may reduce the war premium in crude, but supply data suggest prices may not fall quickly. U.S. commercial crude inventories dropped by 8 million barrels to 433.7 million barrels in the week ended May 29, a much larger decline than analysts expected.
That leaves traders balancing two forces: lower geopolitical risk from the Lebanon ceasefire and tightening inventories ahead of peak summer demand.
In an earlier report, we noted that oil rises as Iran targets Kuwait and Bahrain.
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