Oil prices fell in early morning trade on Thursday in Asia as Israel and Hamas agreed to a pause in fighting and a hostages-for-prisoners exchange, under a framework advanced by the Trump administration. Under the agreement, Hamas will release as many as 20 living hostages this weekend, and Israel will pull back forces to a negotiated line. The deal represents the most substantial step toward ending the Gaza war to date.
Markets responded swiftly. The ceasefire has reduced expectations of a wider regional spillover, particularly fears of disruptions to vital shipping routes or damage to energy infrastructure in adjacent territories. As a result, the “risk premium” baked into oil prices has begun to unwind.
President Trump, in a post on Truth Social, said that the deal means “ALL of the Hostages will be released very soon, and Israel will withdraw their Troops to an agreed upon line”. Israeli Prime Minister Benjamin Netanyahu described the agreement as “a great day for Israel”, while Hamas confirmed the deal and called on Trump and other guarantors to compel Israel to fully implement the agreement.
At the time of writing, oil prices had dropped nearly 1%, with Brent trading at 65.71 and WTI falling to $61.92. The downward pressure on oil prices has been building this week, with OPEC+ leadership continuing to bring more production online and the EIA noting another inventory build in the U.S.
Weakness in demand, whether from slower economic growth, seasonal declines, or energy efficiency gains, could exert additional downward pressure. Several analysts have flagged the risk that oil prices could slip well below current levels if the ceasefire holds and supply continues to outpace demand.
By Charles Kennedy for Oilprice.com
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