Crude prices slipped on Thursday after Israel and Lebanon agreed to implement a ceasefire, with markets pricing in the possibility that the deal could unlock a broader settlement to end the wider US-Israeli war with Iran and, crucially, reopen the Strait of Hormuz.
Brent futures eased towards $96.92 a barrel, while US West Texas Intermediate fell to around $95.24, paring gains accumulated over the previous two sessions when both benchmarks had risen around 2% after a fresh surge in Middle East hostilities, including Iranian drone attacks on Kuwait and US military strikes near the Strait of Hormuz itself.
Shell PLC (LSE:SHEL, NYSE:SHEL) and BP PLC's (LSE:BP.) share prices largely tracked the oil price lower as they fell 0.9% and 0.6%, respectively.
The context behind crude's movements merits some explanation.
The current elevated price environment traces back to 28 February 2026, when the United States and Israel launched a series of strikes against Iran, targeting its nuclear and ballistic missile programmes and resulting in the death of Iran's supreme leader.
Iran's response included closing the Strait of Hormuz, the narrow waterway through which around 20% of the world's seaborne oil trade and a fifth of global liquefied natural gas exports pass each year, prompting the International Energy Agency to describe the ensuing supply disruption as the largest in the history of the global oil market.
Brent surged 10% to 13% in the immediate aftermath, to around $80 to $82 a barrel, and has continued climbing as the strait has remained effectively closed, with shipping traffic at around 5% of pre-conflict levels despite a conditional ceasefire agreed between the US and Iran in April.
With oil now trading close to $97, the Lebanon-Israel agreement announced in Washington on Wednesday has shifted market attention back to the diplomatic channel.
Iran has previously signalled that any regional ceasefire must include Lebanon, and the Washington deal, which creates pilot security zones from which Hezbollah is to be excluded and sets further talks for 22 June, is being read by traders as a stepping stone towards a broader agreement that could eventually restore shipping through the Strait.
Further support for the de-escalation thesis came from Washington, where the Republican-led House of Representatives passed a resolution on Wednesday to block President Donald Trump from continuing military action against Iran, though the measure would require Senate approval and two-thirds majorities in both chambers to override an almost certain presidential veto.
Oil's medium-term trajectory remains clouded by the fragility of every agreement reached so far in this conflict, several of which have unravelled within days, and US crude stockpiles fell by 8 million barrels to 433.7 million barrels in the week ended 29 May, roughly double the draw analysts had forecast, a signal that supply remains tight regardless of what diplomats agree.
For now, however, the direction of travel is lower, and the market is watching 22 June, when Israeli and Lebanese representatives are due to meet again, as the next significant waypoint on the road to a potential Hormuz reopening.
