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EMEA Oil Update: Crude Falls as US-Iran Peace Hopes Grow After Israel-Lebanon Truce

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EMEA crude futures fell in after-hours trading on Thursday as the market assessed the potential easing of Middle East tensions following a ceasefire between Israel and Lebanon, despite reports of continued clashes in southern Lebanon.

Brent crude futures fell 2.8% to $95.09 per barrel, while Murban crude declined 3.7% to $93.60/bbl.

"We've been here before with ceasefire deals and whether Hezbollah is going to join such a deal remains questionable," said Derek Halpenny, head of research at MUFG.

On Wednesday, Israel and Lebanon said they had agreed to a ceasefire, raising hopes for a broader deal between the US and Iran. Tehran has indicated that any wider agreement with Washington would partly depend on an end to hostilities between Israel and the Iran-backed Hezbollah movement.

The ceasefire announcement prompted cautious optimism that easing cross-border conflict could open the door to renewed US-Iran talks. However, Hezbollah rejected a new ceasefire in Lebanon on Thursday, and Israel said it would not withdraw its troops from the country.

Iran's Islamic Revolutionary Guard Corps reportedly said peace in the region would not be possible unless Israel withdrew from the occupied areas in Lebanon.

IRGC said in a statement that the main condition for accepting a ceasefire in the regional war has been a ceasefire on all fronts, including Lebanon.

Iranian Foreign Minister Abbas Araqchi said on Wednesday that Tehran's contacts with Washington had not been cut off, but that negotiations had made no progress. He added that both sides were reviewing the exchanged texts.

Strategists at Saxo Bank said the broader regional conflict remains unresolved and risks to energy supplies continue.

Meanwhile, the Strait of Hormuz remains the oil market's central focus, with supply disruptions and continued closures pushing energy prices to record highs.

On Wednesday, President Trump reportedly said that the Strait would reopen "immediately" if Iran signed a memorandum of understanding to halt hostilities, adding that some parts of the strategic waterway would first need to be cleared of mines.

Every day that passes without a resumption of oil flows leaves the market increasingly vulnerable, ING strategists said, adding that this increases the pressure to strike a deal.

On the supply front, US crude stockpiles decreased by 8 million barrels to 433.7 mmbbls in the week ended May 29, the Energy Information Administration said in its weekly report on Wednesday.

US Strategic Petroleum Reserve inventories fell to 357.1 mmbbls, down from 365.1 mmbbls a week ago, marking a weekly decline of 8 mmbbls.

ING said that inventories are likely to continue to tighten into Q3, leaving upside risk to prices.

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