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US Oil Update: Crude Settles Higher After Iran, Israel Signal Pause in Hostilities

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Crude oil futures edged higher in after-hours trading on Monday, after a rally in the earlier session, as markets weighed signs of a pause in hostilities between Iran and Israel against lingering concerns that tensions in the Middle East could still threaten global energy supplies.

Front-month West Texas Intermediate crude futures were up 0.82% to $91.28 per barrel, while Brent futures were up 1.19% to $94.20/bbl.

Soojin Kim, research analyst at MUFG, said the Middle East conflict continues to disrupt energy flows via the Strait of Hormuz, while tensions involving Lebanon and Hezbollah remain a major obstacle to a broader settlement.

Crude prices rallied earlier in the session amid concerns that an escalation between Iran and Israel could disrupt oil flows from the Middle East. However, gains moderated after officials from both countries signaled that attacks had ceased.

On Monday, Iran's central military command, Khatam al-Anbiya, said that Tehran had ceased strikes against Israel, but warned it would resume hostilities if Jerusalem continues attacks on Lebanon.

Prime Minister Benjamin Netanyahu also said Israel has halted strikes for now, but said its fight against Iran and Hezbollah is not over.

On Sunday, Iran fired missiles towards Israeli territory, calling them retaliation for Israeli attacks on strongholds of the Iranian-backed Hezbollah near Beirut.

Israel, in response, hit a petrochemical plant in southwest Iran that it said was used to produce ballistic missiles. Iran's Islamic Revolutionary Guards said it had retaliated with a strike aimed at a similar Israeli plant in the port city of Haifa.

Erik Meyersson, chief strategist at SEB Research, said this is the most significant escalation since the April ceasefire as the conflict passes its 100-day mark today.

Meanwhile, President Trump said in a Truth Social post that both countries are seeking to agree to an immediate ceasefire.

The Middle East conflict and closure of the Strait of Hormuz are raising concerns that the world will need to tap crude inventories further, after the International Energy Agency said global oil inventories could hit critical levels ahead of the peak summer demand period.

Kpler strategists said US crude oil exports surged to a record 5.6 million barrels per day in May, fueled by Strategic Petroleum Reserve releases and elevated Gulf of Mexico output.

Saxo Bank analysts said the near-closure of the Strait of Hormuz continues to tighten global energy markets, with several oil majors warning that the window before physical shortages emerge may be measured in weeks rather than months.

On the supply side, OPEC+ agreed to increase targets by 188,000 b/d from July, according to an OPEC statement, marking the fourth oil output quota hike approved since the outbreak of the conflict.

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