Oil prices moved lower on Thursday as signs of easing tensions in the Middle East reduced fears of a major disruption to global energy supplies, particularly through the strategically important Strait of Hormuz.
Brent crude dropped 87 cents, or 0.9 percent, to $96.92 a barrel in early trading, while US West Texas Intermediate (WTI) crude fell 78 cents, or 0.8 percent, to $95.24 a barrel. The decline came a day after both benchmarks posted gains of around 2 percent amid fresh military activity across the region.
Markets appeared calmer after Israel and Lebanon announced a ceasefire agreement late Wednesday. The development fuelled expectations that wider diplomatic efforts could gain momentum and eventually help reduce tensions between Washington and Tehran.
Investors are closely watching the Strait of Hormuz, a vital shipping route that handles a significant share of the world’s oil trade. Any improvement in regional relations could lower the risk of disruptions and support the gradual return of normal oil flows.
Adding to the cautious optimism, US President Donald Trump said progress in talks with Iran could emerge as early as this weekend. However, Iranian Foreign Minister Abbas Araqchi offered a more measured view, saying communication channels with Washington remain open but no breakthrough has yet been achieved. He noted that both sides are still reviewing proposals exchanged during recent contacts.
Political developments in Washington also drew attention. The Republican-controlled House of Representatives approved a resolution seeking to limit further US military involvement in the conflict with Iran. The measure still faces major hurdles before it can become law.
Despite Thursday’s price decline, concerns about tightening supplies continued to support the market. Data from the US Energy Information Administration showed crude inventories fell by 8 million barrels last week, nearly double analysts’ expectations.
The sharp drop in stockpiles comes as the International Energy Agency warns that global inventories could come under pressure during the peak summer demand season.
Analysts at ING said oil inventories have helped cushion the market so far, but any recovery in shipments through the Strait of Hormuz is likely to be gradual. As a result, stock levels may continue shrinking in the coming months, leaving room for prices to rise again.
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