Oil prices drop as Iran-Israel ceasefire hopes ease supply fears

Oil prices fell on Tuesday, retreating from a 12-day rally as hopes for a ceasefire between Iran and Israel eased investor fears over potential supply disruptions in the Middle East.

Brent crude dropped USD2.14, or 2.99 percent, to settle at USD69.34 per barrel, while U.S. West Texas Intermediate (WTI) crude fell USD2.07, or 3.02 percent, to USD66.44 per barrel. The pullback came after the White House delayed a decision on further U.S. involvement in the conflict, and President Donald Trump announced an initial ceasefire agreement, though doubts remain about its durability.

Oil markets had surged about 10 percent since mid-June due to escalating hostilities between Iran and Israel, including direct U.S. military involvement and retaliatory actions by Iran. Supply concerns centered on Iran’s crude output of 3.3 million barrels per day (bpd) in May, according to OPEC’s June report citing independent analysts, as well as the threat of conflict spillover across the broader region.

Tensions around the Strait of Hormuz, a vital shipping lane for nearly a fifth of global oil supply, added to market volatility. Iranian lawmakers reportedly approved its closure over the weekend, although the final decision rests with the country’s national security council. The report, broadcast by state-owned Press TV, could not be independently verified.

Analysts at Barclays warned that a closure of the strait would likely push oil prices above USD100 per barrel, citing limited alternative routes and severe impacts on the marketability of spare capacity from key exporters such as Saudi Arabia, the UAE, Iraq, and Kuwait.

However, oil prices eased as the feared broader regional war did not materialize.

According to Barclays, markets were also calmed by the International Energy Agency’s assurance of 1.2 billion barrels in emergency reserves, along with increased output and spare capacity within the OPEC+ alliance.

Despite the decline, Brent prices remained on track for a third consecutive weekly gain.