Oil Slips as Israel-Lebanon Ceasefire Stirs De‑escalation Hopes

Oil prices fell sharply on Thursday, reversing three days of gains, after Israel and Lebanon agreed to a conditional ceasefire that raised the prospect of a broader diplomatic settlement in the Middle East. Brent crude futures dropped 67 cents, or 0.69%, to $97.14 a barrel, while West Texas Intermediate lost 62 cents, or 0.65%, to $95.40. The declines followed a 2% jump the previous day—and an almost 10% surge earlier in the week—driven by escalating military confrontations, including Iranian attacks on Kuwait and US hostile actions in southern Iran.\n\nThe breakthrough, announced jointly by the two countries and the United States, is contingent on a “complete cessation” of fire from the Iran‑backed Hezbollah movement. Should it hold, diplomats hope it will remove a main obstacle in the stalled negotiations between Washington and Tehran over a longer‑term truce and the reopening of the Strait of Hormuz, the critical chokepoint for global oil shipments. Viewed from European trading desks, the accord peels back one layer of the risk premium that had pushed prices higher, though analysts caution that the framework remains fragile and talks are “dragging on”, according to officials briefed on the process.\n\nIn Washington, the domestic political landscape added another variable. The House of Representatives, defying Republican leaders, passed a resolution seen as a rebuke of President Donald Trump’s authority to wage war without congressional approval. Trump himself signalled a possible breakthrough, telling reporters that progress could be achieved “as early as this weekend”. The juxtaposition of a legislative constraint and White House optimism underscored how foreign policy is increasingly entangled in partisan battles, with direct implications for energy markets.\n\nFrom a regional perspective, the ceasefire represents an opening to wind down what Arab commentary frames as an “American‑Israeli war with Iran”. Yet the path remains treacherous. Earlier in the week, a spike in hostilities—including an Iranian strike on Kuwait—had threatened to ignite a wider conflict. Any renewed flare‑up, or a failure to secure Hezbollah’s compliance, would swiftly reverse the gains. For now, tanker insurance rates have eased and futures curves have flattened, but the market remains jumpy, awaiting concrete steps towards reopening Hormuz and a sustained reduction in military tensions.