Oil Prices Rise Amid Uncertainty Over Middle East Ceasefire

Oil prices climbed on Thursday as doubts persisted over a fragile two-week ceasefire in the Middle East, raising concerns that energy flows through the strategically important Strait of Hormuz could remain limited.

Brent crude futures rose $1.96, or 2.07 percent, to $96.71 a barrel by 06:25 a.m. Saudi time. US West Texas Intermediate (WTI) crude increased $2.60, or 2.75 percent, to $97.01 a barrel. Both benchmarks had fallen below $100 per barrel in the previous session, with WTI recording its largest drop since April 2020 amid early hopes that the ceasefire would reopen the strait.

Analysts said market participants remain cautious, uncertain about how ongoing negotiations between the US and Iran could affect oil flows. Vandana Hari, founder of oil market analysis firm Vanda Insights, said, “The chances of a meaningful reopening (of the Strait of Hormuz) any time soon look dim,” predicting continued volatility in oil prices. She added, “The futures market looks a bit broken. Otherwise, prices should have snapped right back to pre-ceasefire levels by now.”

The Strait of Hormuz is a critical corridor connecting Gulf oil producers such as Iraq, Saudi Arabia, Kuwait, and Qatar to global markets, typically carrying about 20 percent of worldwide oil and gas supplies.

The viability of the ceasefire remains uncertain. Israel continued attacks on Lebanon on Wednesday, prompting Iran to suggest it would be “unreasonable” to proceed with talks for a permanent peace deal. Shippers said they required clearer guidance on the ceasefire terms before resuming transit through the strait. Iran has issued maps to guide vessels around mines and designated safe passage routes in coordination with the Revolutionary Guards, Iranian media reported.

Standard Chartered analysts said, “Logistic disconnects, security fears, elevated insurance premiums and operational constraints mean that very little additional energy is likely to be supplied via the Strait of Hormuz in the next two weeks.”

Regional oil infrastructure continues to face threats. Iran has targeted sites in neighboring countries following the ceasefire, including a pipeline in Saudi Arabia used to bypass the blocked strait. Kuwait, Bahrain, and the United Arab Emirates have also reported missile and drone attacks.

Despite rising prices, Goldman Sachs kept its third- and fourth-quarter oil price forecasts unchanged, projecting Brent at $82 and $80, and WTI at $77 and $75. The bank lowered its second-quarter forecasts for Brent to $90 and WTI to $87, citing a reduction in risk premiums and a slight increase in oil flows through the strait.

Oil markets remain highly sensitive to geopolitical developments in the region, and any further escalation could quickly drive prices higher, adding pressure to global energy markets.