West Texas Intermediate (WTI) Crude Oil declined by nearly 3% on Thursday, trading around $91 per barrel, following the announcement of a ceasefire agreement between Israel and Lebanon. This development, announced by the United States, has improved market sentiment by reducing geopolitical tensions in the Middle East and snapping a three-day winning streak for WTI prices [1].
The ceasefire is seen as removing a significant obstacle in US-Iran negotiations, raising hopes that talks between the two countries could regain momentum. However, the article notes that further declines in oil prices may be limited unless there is meaningful progress toward a deal that would reopen the Strait of Hormuz, a critical chokepoint responsible for 20% of global oil shipments [1].
The ongoing Iran war has caused a substantial supply shock, with the International Monetary Fund (IMF) estimating a reduction in global oil production by around 14 million barrels per day. The IMF also warned that global oil inventories could fall to a five-year low of 7.5 billion barrels in July, compared to 8 billion barrels before the war began. Oil prices remain approximately 3% above the levels assumed in the IMF's April forecast for 3.1% global growth, and future price movements are expected to depend on the reopening of the Strait of Hormuz [1].
Additionally, Fitch Ratings has revised its 2026 global growth forecast downward by 0.2 percentage points to 2.4%, citing the ongoing oil crisis as a key factor [1].
CONCLUSION
The Israel-Lebanon ceasefire has led to a notable decline in WTI oil prices by easing geopolitical tensions, but significant supply risks and economic concerns remain. The IMF and Fitch Ratings highlight ongoing challenges, including reduced oil production and lower global growth forecasts, underscoring the market's sensitivity to developments in the Middle East and the status of the Strait of Hormuz.