Crude benchmarks are easing lower today, with ICE Brent Crude Futures slipping 0.89% to 96.94. Similarly, NYMEX Light Crude Oil Futures (WTI) have lost 0.83%, trading at 95.22.
Crude oil prices are holding higher amid the lack of a substantial breakthrough in negotiations between the United States and Iran to end the war that is causing global supply disruptions.
This stands in contrast to what Donald Trump claims about progress in the talks: in reality, there is none, and the Iranians themselves acknowledge this. Meanwhile, the resilience of the US economy helps keep oil prices higher, as demand could remain strong.
The only tangible progress is the ceasefire announcement between Israel and the official Lebanese government without Hezbollah so far.
An established ceasefire there would boost hopes for a broader calm in this regional war. One of the main factors that could collapse the regional ceasefire is the worsening of fighting between Israel and Hezbollah. However, we have seen many rounds of calm in the past that ended with a return to escalation. Meanwhile, Israel’s attacks on Lebanon were renewed today after the announcement.
This puts the fragile truce to a decisive test and leaves it vulnerable to collapse at any time, thereby destroying whatever hope remains of reaching a broader agreement with Iran. Furthermore, the announcement of a truce with Lebanon is facing widespread criticism within Israel from both hardline and moderate parties. As we approach crucial elections, this might lead Prime Minister Benjamin Netanyahu to prefer a return to military action against Hezbollah to achieve domestic political objectives, potentially ignoring, at least publicly, American interests.
On the Iranian front, Trump constantly speaks about negotiations moving forward with Iran and that they have agreed not to possess a nuclear weapon. However, the Iranians have stated that although communication channels remain open with the American side, no significant breakthrough has been achieved. In other words, Iran has not made any tangible concessions.
Therefore, any statements from Trump that we might see in the coming hours and days will be nothing more than attempts to force oil prices down. Unless we receive a signed, written, and binding agreement, we should expect ongoing escalation that will maintain the Strait’s closure and drive oil prices higher.
On the economic side, the US economy continues to show sufficient resilience to challenge the assumption that rising oil prices and a hawkish monetary policy outlook will cause major destruction in demand. This resilience is what allows energy prices to hold steady at high levels. Labour market figures remain better than expected in both the ADP non-farm employment change report and the JOLTS job openings report. Additionally, the business activity numbers for both the services and manufacturing sectors, issued by the Institute for Supply Management (ISM), came in better than expected, indicating that these sectors are still growing. This hypothesis will be further tested as the market anticipates the Bureau of Labour Statistics’ official jobs report tomorrow.
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