New York (TDI): Oil prices declined on Thursday after reports of a ceasefire between Israel and Lebanon raised expectations that wider regional de-escalation could follow, potentially easing tensions involving Iran and improving the chances of reopening key shipping routes such as the Strait of Hormuz.
Brent crude dropped by 87 cents (0.89%) to $96.92 per barrel by 0458 GMT, while U.S. West Texas Intermediate (WTI) fell 78 cents (0.81%) to $95.24. This came after both benchmarks had gained around 2% in the previous session amid renewed conflict in the Middle East, including reported Iranian strikes in Kuwait and US military actions near the Strait of Hormuz.
The ceasefire agreement between Israel and Lebanon, announced late Wednesday, fueled hopes for broader diplomatic progress between Washington and Tehran. Iranian negotiations have reportedly been tied in part to a halt in fighting involving Israel and Lebanon.
US President Donald Trump indicated that progress in talks with Iran could be possible as early as the weekend. However, Iranian Foreign Minister Abbas Araghchi said communications with Washington were still ongoing but no significant breakthrough had been achieved, with both sides still reviewing exchanged proposals.
Read More: Hostilities Intensify in US–Iran Conflict as Oil Prices Jump
In Washington, the Republican-controlled House passed a resolution aiming to restrict presidential authority over military actions against Iran. The measure would still require approval from the Senate and a veto-proof majority in both chambers to become effective.
On the supply side, US crude inventories fell by 8 million barrels to 433.7 million barrels in the week ending May 29, according to the Energy Information Administration, far exceeding analyst expectations of a 4-million-barrel decline.
The International Energy Agency warned that global oil stockpiles could tighten further ahead of peak summer demand if current drawdown trends continue, even as Chinese crude imports reportedly declined sharply in May compared to March.
Read More: Oil Prices Ease as Markets Weigh Uncertain US–Iran Talks
Market analysts noted that while inventories are currently cushioning supply risks, any reopening of flows through the Strait of Hormuz would likely result in only a gradual recovery in supply stability. ING analysts added that tighter inventories could keep upward pressure on prices into the third quarter.
