Global oil prices found a steady footing in early trading on Friday after reports confirmed a U.S.-brokered ceasefire agreement between Israel and Hamas. This development, seen as a crucial first step toward de-escalating the two-year Gaza conflict, immediately eased the geopolitical risk premium that has been a supportive factor for crude markets.
Read More: Pakistan’s Stance on Recognizing Israel: History, Geopolitics, and the Evolving Debate
After dropping by more than 1% in the previous session in response to the initial rumors of a deal, the market’s war-risk concerns receded. Brent crude futures edged up by $0.09, or 0.1%, to trade at $65.31 per barrel at 0044 GMT, while U.S. West Texas Intermediate (WTI) crude rose $0.12, or 0.2%, to $61.63 per barrel. The muted reaction, with prices holding relatively stable, indicated an initial investor relief that a major regional supply disruption had likely been averted. The cessation of hostilities is also expected to reduce the threat of Houthi attacks on Red Sea shipping, which have disrupted global trade lanes connecting to the Suez Canal.
Deal Details and Broader Market Context
The ceasefire, which the Israeli government reportedly approved on Friday, marks the first phase of a broader Washington-backed peace initiative. Under the arrangement, Israel will begin a partial withdrawal from Gaza, and Hamas will release all remaining hostages in exchange for the freeing of hundreds of Palestinian prisoners. The deal has been hailed as a major breakthrough by U.S. President Donald Trump, though analysts caution that the agreement remains fragile, as key details like the post-war governance of Gaza and the disarmament of Hamas are still unclear.
Counteracting the easing Mideast tensions, however, are persistent concerns over the conflict in Ukraine. Waning prospects for a quick peace deal there imply that sanctions on Russia, a major global oil exporter, are likely to continue, limiting supply on the global market. Furthermore, a mixed U.S. inventory report also provided counteracting factors, with a draw on crude stocks at the Cushing, Oklahoma, hub offering some support, but a simultaneous large build at the U.S. Gulf Coast suggesting ample supplies.
OPEC+ Strategy and Future Supply Concerns
Meanwhile, the oil market continues to grapple with the cautious strategy of OPEC+ (the Organization of the Petroleum Exporting Countries and its allies). The group recently agreed to a modest production increase of approximately 137,000 barrels per day for the coming month. This small hike reflects the cartel’s cautious balancing act: an attempt to meet resilient global demand while preventing an oversupply.
By implementing smaller-than-expected increases, OPEC+ is prioritizing market stability and a higher price floor for its members’ budgets. However, this strategy faces structural bearishness from record-high non-OPEC production, particularly from the U.S. shale sector. Analysts warn that if global demand, especially in Asia and Europe, begins to weaken significantly, OPEC+’s current unwinding of cuts could quickly lead to a structural surplus in late 2025 or 2026, putting renewed downward pressure on prices.
Are the easing Mideast tensions enough to fully offset the ongoing supply concerns from OPEC+ and the geopolitical risks in Ukraine?
