Oil falls as Lebanon and Israel agree on a ceasefire

Oil prices declined early today after Israel and Lebanon announced a ceasefire, easing tensions and fueling optimism for a wider deal to end the US-Israeli conflict with Iran. The agreement could eventually lead to the reopening of the Strait of Hormuz, a critical shipping route for global oil supplies. Brent crude futures dropped 87 cents, or 0.89%, to $96.92 per barrel, while US West Texas Intermediate (WTI) crude fell 78 cents, or 0.81%, to $95.24. The price dip followed a 2% rise in both benchmarks yesterday, triggered by escalating violence in the Middle East, including Iranian attacks on Kuwait and US military strikes near the Strait of Hormuz. The ceasefire, confirmed late last night, has heightened expectations for progress in US-Iran negotiations, which Iran has linked to an end to fighting between Israel and Lebanon. US President Donald Trump suggested potential breakthroughs in talks with Iran as soon as this weekend, though Iranian Foreign Minister Abbas Araqchi clarified that negotiations remain stalled, with both sides reviewing exchanged proposals. Meanwhile, the Republican-led US House approved a resolution to block Trump from continuing the war against Iran, though Senate approval and a veto override would be required for it to take effect. US crude stockpiles saw a significant drawdown of 8 million barrels last week, falling to 433.7 million barrels—a far larger decline than the 4-million-barrel reduction analysts had anticipated. The International Energy Agency (IEA) warned that global oil inventories could reach critical levels ahead of peak summer demand if stockpiles continue depleting at the current rate, despite China’s crude imports dropping by 6 million barrels per day in May compared to March. ING analysts noted that while the Strait of Hormuz’s potential reopening could stabilize supplies, the recovery in oil flows would likely be slow and gradual. They cautioned that inventories would remain tight into the third quarter, leaving upward pressure on prices. The market’s sensitivity to geopolitical risks and supply constraints continues to drive volatility in crude prices.