Oil prices fell Thursday after President Trump said Wednesday night that Israel and the Palestinian group Hamas have agreed to the “first phase” of a peace plan proposed by the US administration.
Futures contracts on Brent (BZ=F) crude, the global benchmark for crude oil, fell by more than 0.8% Thursday after a week of positive movement. Futures on West Texas Intermediate (CL=F) crude, the US benchmark, fell by roughly the same margin.
Under the terms of the peace plan proposed by the Trump administration, both sides of the Israel-Palestine conflict would release all hostages and Israel would begin a withdrawal from Gaza, the nexus of the war. The agreement by Israel and Hamas to President Trump’s proposal marks the first substantive step in months toward negotiations to potentially end the war.
As conflict in the Middle East had spilled outside of Israel and Palestine’s borders, oil prices initially spiked upward — especially as Israel and Iran briefly exchanged airstrikes in early June — on worries of a substantive decrease of Iranian oil supply to the global market. But the spike was short-lived, and both Brent crude and WTI crude are down roughly 12% on the year.
Rystad Energy, a global energy consultancy and research firm, said substantive price movement will hinge on the long-term success or failure of a peace deal and, separately, developments in the war in Ukraine.
“As of today, the immediate impact on the oil markets will be a slight decrease in the geopolitical risk premium as the markets figure out the details of the peace plan,” said Rystad chief economist Claudio Galimberti.
Galimberti “If the plan for stable peace proves credible, its impact on prices could be more structural and profound. Yet, as long as the war in Ukraine continues, the geopolitical risk premium is destined to remain elevated.”