- Oil prices fell after a three-day rally due to a conditional Israel-Lebanon ceasefire agreement
- Brent crude dropped toward $97 a barrel, WTI traded near $95 amid easing Middle East tensions
- The ceasefire depends on a full halt of hostilities by Iran-backed Hezbollah, per a joint statement
Oil prices retreated on Thursday after a three-day rally as a conditional ceasefire agreement between Israel and Lebanon raised hopes of broader de-escalation in the Middle East and renewed focus on negotiations involving Iran. Brent crude fell toward $97 a barrel, while West Texas Intermediate traded near $95. The decline came after both benchmarks had gained nearly 10% during the first three sessions of the week amid concerns that disruptions in the region would prolong supply constraints.
The ceasefire agreement is contingent on a complete halt to hostilities by Iran-backed Hezbollah, according to a joint statement from Israel, Lebanon and the US. The development is being viewed as a potential step toward reducing tensions that have complicated talks between Washington and Tehran.
Hormuz Still Holds the Key
Despite the pullback in prices, traders remain focused on the fate of the Strait of Hormuz, through which roughly one-fifth of global crude supplies normally pass.
The US and Iran have reportedly agreed on a broad framework to extend their truce by two months and eventually reopen the critical waterway. However, negotiations over the final terms continue, while fresh clashes in the region underscore the fragility of the process.
Iran's foreign minister was quoted by the semi-official Tasnim news agency as saying that no tangible progress had been achieved in the talks and warning that Tehran could target objectives inside Israel if attacks on Beirut continue. US President Donald Trump, meanwhile, said the strait could reopen “immediately” once Iran signs a memorandum of understanding to cease armed hostilities and remaining issues, including sea mines, are addressed.
Even as geopolitical tensions show signs of easing, physical oil market fundamentals remain tight. US government data released on Wednesday showed crude inventories at Cushing, Oklahoma — the delivery hub for WTI futures — fell for a sixth consecutive week and are now close to minimum operating levels. That has reinforced concerns that the global supply cushion is thinning as prolonged disruptions in the Middle East continue to limit flows.
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