Oil steadies as investors assess Iran-Israel ceasefire, demand outlook

Oil prices found footing on Wednesday after a volatile week, as investors evaluated the apparent stability of the US-brokered ceasefire between Iran and Israel. The truce, declared after 12 days of escalating strikes, has held for over 24 hours despite initial violations and mutual accusations. Both sides have now signaled that their air campaigns have ended, at least for now, following direct intervention by US President Donald Trump and mediation by Qatar.

While the ceasefire has reduced immediate concerns about supply disruptions from the Middle East, traders remain alert to the risk of renewed hostilities or further geopolitical shocks.

US Demand and Inventory Data Offer Support

Beyond geopolitics, oil prices were buoyed by industry data showing a 4.23 million barrel drawdown in US crude inventories last week. This suggests that underlying demand in the world’s largest oil consumer remains resilient, even as broader economic signals point to a possible slowdown.

The American Petroleum Institute’s figures provided a counterweight to bearish sentiment after prices hit multi-week lows, with Brent crude rebounding to $67.60 per barrel and WTI to $64.80.

Did you know?
The last time oil prices saw such sharp swings driven by Middle East conflict was during the 2019 US-Iran tensions, which sent Brent crude above $70 per barrel in a matter of days.

Fed Rate Cut Expectations Add a Floor to Prices

Expectations for a potential Federal Reserve interest rate cut as early as July have also helped steady oil markets. Lower borrowing costs typically spur economic activity and energy demand. Jerome Powell’s testimony as Fed Chair hinted at a possible acceleration of monetary easing, and futures markets now price in nearly 60 basis points of rate cuts by year-end.

This monetary backdrop is helping to offset some of the downward pressure from recent macroeconomic data.

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Market Eyes on Middle East Risks and Supply Outlook

Despite the current calm, analysts warn that the risk of renewed conflict in the Middle East has not disappeared. The recent US and Israeli strikes on Iranian nuclear infrastructure only set back Iran’s program by a few months, according to preliminary intelligence assessments, and both sides retain significant military capabilities.

ING analysts note that while immediate supply fears have eased, the market remains sensitive to any sign of escalation or breakdown in the ceasefire.

Oil Likely to Consolidate as Investors Await More Data

With the ceasefire holding and US demand indicators stable, oil prices are expected to consolidate in the $65-$70 per barrel range in the near term. Traders are now watching for official US government data on crude and fuel inventories, as well as upcoming GDP and durable goods reports, for further clues on demand trends.

Any shift in the geopolitical or economic outlook could quickly alter the market’s direction.