Oil & Gas

Oil prices declined on Thursday after Israel and Lebanon agreed to a ceasefire, raising optimism that broader diplomatic efforts could ease tensions across the Middle East. Market participants viewed the development as a potential step toward ending the conflict involving the United States, Israel, and Iran, which could eventually lead to the reopening of the Strait of Hormuz, a critical global oil transit route. Brent crude fell 0.8% to $97.03 per barrel, while U.S. West Texas Intermediate (WTI) dropped 0.7% to $95.32.

 Despite the decline, losses were limited as traders remained cautious amid ongoing uncertainty in the region. Oil prices had climbed around 2% on Wednesday following renewed hostilities, including Iranian attacks on Kuwait and U.military operations near the Strait of Hormuz. The ceasefire announcement between Israel and Lebanon has fueled hopes for renewed negotiations between Washington and Tehran, with Iran previously linking any progress in talks to a cessation of Israeli military actions against Lebanon.

Diplomatic signals from both sides also contributed to market sentiment. U.S. President Donald Trump indicated that meaningful progress in negotiations with Iran could emerge as early as this weekend. Meanwhile, Iranian Foreign Minister Abbas Araqchi stated that communication channels with Washington remain open, although no breakthrough has yet been achieved. In the United States, the House of Representatives approved a resolution aimed at limiting further military involvement against Iran, though it still faces significant legislative hurdles.

Supporting oil prices, U.S. crude inventories fell by 8 million barrels to 433.7 million barrels during the week ending May 29, significantly exceeding analysts' expectations for a 4-million-barrel decline. However, weaker demand from China has continued to weigh on the market. Iranian crude prices slipped into discount territory for the first time since April, while Russian crude premiums softened as sellers reduced prices to attract Chinese buyers amid slowing consumption growth.