Oil settles higher after early surge fades on Israel-Lebanon talks

HOUSTON: Oil prices gave up much of their earlier advance on Thursday but still ended the session higher after Israel said it would move toward direct negotiations with Lebanon as soon as possible.

Crude benchmarks had climbed sharply earlier in the day, with gains of more than 5pc at one stage, as uncertainty over how durable a two-week ceasefire in the Middle East would prove raised concerns about continued limits on energy flows through the Strait of Hormuz.

Later, those gains narrowed after Israeli Prime Minister Benjamin Netanyahu said he had instructed officials to begin peace talks with Lebanon. The proposed talks would also cover the disarming of Hezbollah.

Benchmarks retreat from session highs

Brent crude futures were up 90 cents, or 1pc, at $95.65 a barrel at 12:58pm ET (1658 GMT). Earlier in the session, Brent had climbed as high as $99.50 before easing back.

US West Texas Intermediate crude also pulled back from its intraday peak, though it remained notably higher on the day. WTI was up $3, or 3.2pc, at $97.39 after touching a session high of $102.70.

The move followed a sharp drop in the previous trading session, when both major benchmarks slipped below $100 a barrel. WTI posted its biggest one-day decline since April 2020, driven by optimism that the ceasefire could lead to the reopening of the Strait of Hormuz.

Ceasefire concerns remain in focus

Thursday’s trading reflected the market’s shifting assessment of geopolitical risk in the region. Early buying was linked to doubts about whether the two-week ceasefire would hold and whether restrictions affecting the strategic waterway would continue.

As the session progressed, sentiment changed after Netanyahu said he had given instructions for Israel to start direct negotiations with Lebanon as soon as possible. That development reduced some of the earlier risk premium in oil prices, though both Brent and WTI still remained in positive territory.

The Strait of Hormuz remains a central concern for energy markets because of its importance to global oil flows. In the previous session, hopes that the ceasefire would help reopen the route had pushed prices lower, but renewed uncertainty on Thursday initially sent prices sharply upward before the market pared those gains.

By midday trading in the United States, the market had settled into a more moderate rise, with Brent holding near the mid-$95 level and WTI trading below $100 after both contracts had briefly approached or exceeded that threshold earlier in the day.