- Oil prices pared gains after Iran's armed forces announced an end to military operations against Israel, signaling a potential de-escalation in Middle East tensions that had fueled a risk premium in crude.
- Brent crude fell back toward $89 per barrel after earlier spiking above $91, as traders reassessed the likelihood of supply disruptions from the region.
- Market participants remain cautious, awaiting official confirmation and monitoring for any retaliatory actions that could reignite the conflict.
Iran's Statement Triggers a Reversal
Oil prices eased on Thursday after Iran's armed forces declared a halt to military operations against Israel, according to reports from Fars News. The announcement prompted a sharp pullback from intraday highs, with Brent crude dropping more than $2 from its peak.
The move suggests that the immediate threat of a broader conflict—which had driven crude to multi-month highs—may be receding. However, traders remained wary, noting that the situation remains fluid and that any fresh escalation could quickly reverse the slide.
"The market is breathing a sigh of relief, but we've seen this movie before," said a senior energy trader at a European bank. "Without a formal ceasefire or a clear de-escalation pact, the risk premium will stay elevated."
Geopolitical Risk Premium Persists
The Israel-Iran confrontation had added a significant geopolitical risk premium to oil prices in recent weeks, with investors bracing for potential disruptions to supplies from the Middle East, home to about a third of global crude output. Key chokepoints, including the Strait of Hormuz, remained in focus.
"Even with a reported end to operations, the market will need concrete steps from both sides to fully unwind the risk premium," analysts at a major consultancy noted in a client brief. "Any hostage-taking or sabotage could reignite fear."
Market Reaction and Outlook
Following the news, West Texas Intermediate also fell, settling near $84 a barrel. The pullback offered some relief to consumers and energy-intensive industries, but the broader outlook remains uncertain.
"Short-term, prices will likely trade in a range until we get clarity," said a commodities strategist. "If tensions ease further, we could see a move back to $85; if not, we'll test $95."
Correction: An earlier version of this article incorrectly stated that Iran had declared a ceasefire. The announcement was an end to military operations, not a formal ceasefire.