Oil Prices Slip As Israel-Lebanon Ceasefire Raises Hopes For Peace Deal

Global oil prices fell on Thursday after Israel and Lebanon agreed to a ceasefire, easing fears of further escalation in the Middle East and raising hopes for a broader agreement that could eventually reduce tensions involving Iran.

Brent crude dropped 77 cents, or 0.8%, to $97.03 per barrel, while U.S. West Texas Intermediate crude fell 70 cents, or 0.7%, to $95.32. The decline followed a sharp rise of about 2% on Wednesday, when renewed hostilities in the region fueled concerns over oil supplies.

The ceasefire agreement announced by Israel and Lebanon has increased optimism that diplomatic efforts between the United States and Iran could gain momentum. Iran has previously indicated that any progress in negotiations would depend partly on an end to Israeli military actions involving Lebanon and Hezbollah.

U.S. President Donald Trump also suggested that negotiations with Iran could see meaningful progress as early as this weekend. However, Iranian Foreign Minister Abbas Araqchi said that while communication channels with Washington remain open, no major breakthrough has yet been achieved, with both sides still reviewing exchanged proposals.

Despite the decline in prices, analysts say the market remains cautious. Ongoing concerns about disruptions to shipping routes and energy supplies continue to support oil prices.

Adding to supply concerns, U.S. crude inventories fell by 8 million barrels to 433.7 million barrels in the week ending May 29, according to data from the Energy Information Administration. The drop was significantly larger than the 4 million barrel decline analysts had expected, suggesting stronger demand or tighter supplies.

Meanwhile, weaker demand from China has helped limit further gains in oil prices. Traders reported that Iranian crude has slipped into discounted territory for the first time since April, while Russian oil exporters have reduced prices in an effort to attract Chinese buyers amid slowing demand.

As investors closely monitor developments in the Middle East, oil markets remain sensitive to both geopolitical tensions and global demand trends, with future price movements likely to depend on the progress of regional peace efforts and supply conditions.