Oil prices experienced a slight decline on Thursday following a ceasefire agreement between Israel and Lebanon, which has sparked optimism regarding a potential broader diplomatic resolution that may ultimately resolve the U.S.-Israeli tensions with Iran. Sentiment was further shaped by the U.S. House of Representatives’ approval of a resolution designed to restrict President Donald Trump’s capacity to pursue military action against Tehran. Brent crude futures declined by 67 cents, representing a decrease of 0.69%, settling at $97.14 per barrel as of 0015. Meanwhile, U.S. West Texas Intermediate crude experienced a drop of 62 cents, or 0.65%, reaching $95.4 per barrel. The decline followed a robust rally in the preceding session, during which both benchmarks appreciated approximately 2%, thereby extending the gains observed on Tuesday.

Prices experienced an upward shift following renewed tensions in the Middle East, characterised by Iranian assaults on Kuwait and U.S. military actions in proximity to the Strait of Hormuz. In Washington, the House, under Republican control, approved a resolution on Wednesday aimed at curtailing Trump’s ongoing military engagement with Iran. However, the measure would still necessitate Senate approval and a two-thirds majority in both chambers to override what is anticipated to be a presidential veto. Trump stated on Wednesday that negotiations with Iran might witness advancements as soon as this weekend. Meanwhile, Iranian Foreign Minister Abbas Araqchi indicated that communications between Tehran and Washington persist, although no progress has been achieved to date. He noted that both parties are presently examining the documents shared throughout the discussions.

Haitong Futures, as reported, indicated that oil prices may trend towards the upper limits of their trading range due to an ongoing supply-demand imbalance coupled with a swift decline in global crude inventories. Analysts observe that even with a formal ceasefire agreement, it may take months for shipping activity through the Strait of Hormuz to return to normal levels. They noted that any damage to energy infrastructure could further impede the recovery process. Last month, Saudi Aramco Chief Executive Officer Amin Nasser warned that disruptions in the Strait of Hormuz could delay stability in global oil markets until 2027. He stated that extended disruptions might impact almost 100 million barrels of oil supply on a weekly basis.

Saudi Aramco continues to hold its position as the largest oil producer globally. Morgan Stanley stated that the oil market is involved in “a race against time,” cautioning that the elements that have contributed to averting a more significant increase in crude prices may start to diminish if the Strait of Hormuz remains closed through June. The broking indicated that robust U.S. crude exports, coupled with diminished demand from China, have thus far contributed to mitigating a portion of the supply shock. However, it cautioned that an extended interruption to the critical shipping lane could constrict global oil supplies once more if the disruption persists beyond the timeframe in which the U.S. and China are able to mitigate the effects.