Oil Prices Edge Up as Traders Weigh Fragile Iran-Israel Ceasefire Against Supply Stability

Oil markets experienced a slight rebound today, with prices climbing as investors meticulously weigh the delicate stability of the ceasefire recently brokered between Iran and Israel. This modest uptick follows a period where crude values had retreated to multi-week lows, driven by the calming prospect that the vital flow of crude oil wouldn't face immediate disruption.

At present, Brent crude futures have gained 85 cents, or 1.3%, reaching $67.99 a barrel, while its U.S. counterpart, West Texas Intermediate (WTI) crude, advanced by 87 cents, or 1.4%, to $65.24. This movement comes after Brent settled on Tuesday at its lowest point since June 10, and WTI since June 5—both dates preceding Israel's surprise attack on key Iranian military and nuclear facilities on June 13. Indeed, oil prices had previously surged to five-month highs in the wake of the U.S. launching its own airstrikes on Iran's nuclear infrastructure over the weekend of June 22.

The current ceasefire, spearheaded by U.S. President Donald Trump, remains a focal point for the markets. Earlier on Tuesday, both Iran and Israel signaled a pause in their air conflict, at least for now, after President Trump publicly chastised them for violating the nascent truce. Despite both nations attempting to claim victory after 12 days of intense exchanges—which included the U.S. joining by targeting Iran's uranium-enrichment facilities—a preliminary U.S. intelligence assessment suggests that these airstrikes did not obliterate Iran's nuclear capability, but rather set it back by a few months.

"Global energy prices are moderating following the Israel-Iran ceasefire. The base case for our oil strategists remains anchored by fundamentals, which indicate sufficient global oil supply," noted analysts at JP Morgan in a recent client communication, highlighting a return to supply-demand dynamics as geopolitical fears recede.

However, the inherent fragility of the truce casts a long shadow. As David Oxley, chief climate and commodities economist at Capital Economics, put it, "The Israel-Iran ceasefire is likely to prove fragile. But so long as both parties show themselves unwilling to attack export-related energy infrastructure and/or disrupt shipping flows through the Strait of Hormuz, we expect bearish fundamentals in the oil market to continue... from here."

The Strait of Hormuz remains a critical artery for global energy. This narrow waterway, nestled between Iran and Oman, facilitates the passage of a staggering 18 million to 19 million barrels per day (bpd) of crude oil and fuel, representing nearly a fifth of the world's total consumption. Direct U.S. involvement in the conflict had initially raised grave concerns about potential disruptions to this vital chokepoint, a scenario that would undoubtedly send oil prices spiraling upwards.

On the domestic front, investors are keenly awaiting official U.S. government data on crude and fuel stockpiles, due later today. This follows industry figures released by the American Petroleum Institute (API) on Tuesday, which indicated a significant draw of 4.23 million barrels in U.S. crude inventories for the week ended June 20, a figure closely watched as an indicator of demand and supply balances within the world's largest oil consumer.

As the market digests these various factors, the short-term trajectory of oil prices will hinge on the sustained adherence to the ceasefire and the upcoming inventory reports, reinforcing the delicate balance between geopolitical stability and fundamental supply-demand dynamics.