Crude oil prices moved lower on Thursday as investors reacted positively to a ceasefire agreement between Israel and Lebanon, raising hopes that wider diplomatic efforts could help reduce tensions across the Middle East.
The decline in oil prices came despite recent hostilities involving Iran and military activity near the Strait of Hormuz. Market sentiment improved after signs emerged that negotiations between the United States and Iran could continue, reducing fears of prolonged supply disruptions from one of the world's most important oil-producing regions.
Brent crude futures fell 67 cents, or 0.69%, to US$97.14 per barrel, while US West Texas Intermediate (WTI) crude declined 62 cents, or 0.65%, to US$95.40 per barrel.
Both benchmarks had gained around 2% on Wednesday, extending the previous session's rally following renewed tensions in the Middle East, including Iranian attacks on Kuwait and US military strikes near the Strait of Hormuz.
Oil markets found some relief after Israel and Lebanon agreed to implement a ceasefire, encouraging expectations that broader diplomatic efforts could help de-escalate regional conflicts.
Investors viewed the development as a positive step towards reducing geopolitical risks that have recently driven sharp movements in energy markets. The agreement has also strengthened hopes that negotiations involving Iran could gain momentum in the coming days.
In the United States, the Republican-led House of Representatives approved a resolution seeking to prevent President Donald Trump from continuing military action against Iran without further congressional approval.
However, the measure still requires Senate approval and would need two-thirds majorities in both chambers to override a potential presidential veto.
Market participants interpreted the development as a sign that political pressure is increasing to avoid a prolonged military conflict, which could otherwise threaten global oil supplies.
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Investor attention remains centred on diplomatic discussions between Washington and Tehran.
President Donald Trump indicated on Wednesday that progress in negotiations with Iran could emerge as early as this weekend, raising hopes of a potential breakthrough.
Meanwhile, Iranian Foreign Minister Abbas Araqchi stated that communication channels between Iran and the United States remain open. However, he noted that no meaningful progress has yet been achieved and both sides are continuing to review exchanged proposals.
The comments suggest that while diplomacy remains active, significant challenges still need to be addressed before any agreement can be reached.
Despite the decline in oil prices, fresh inventory data provided support to the market.
The US Energy Information Administration reported that crude oil stockpiles fell by 8 million barrels to 433.7 million barrels during the week ended May 29.
The drawdown was substantially larger than analysts' expectations of a 4-million-barrel decline, indicating stronger demand conditions and tighter market fundamentals.
Market analysts continue to highlight tightening global crude supplies as a key factor underpinning prices.
According to Haitong Futures, crude oil prices could remain near the upper end of their recent trading range due to a persistent supply-demand imbalance and rapidly declining global inventories.
Falling stock levels across major consuming regions continue to provide support to the market even as geopolitical concerns temporarily ease.
Crude oil prices retreated as investors welcomed the Israel-Lebanon ceasefire and signs of continued diplomatic engagement between the United States and Iran. While easing geopolitical tensions have reduced immediate concerns over supply disruptions, falling US inventories and tightening global supplies continue to support the broader oil market. Traders are likely to remain focused on developments in Middle East negotiations and inventory trends for further direction.
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Published on: Jun 4, 2026, 8:25 AM IST
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