Global crude oil prices edged lower this week as the long-anticipated ceasefire between Israel and Hamas took effect, easing geopolitical tensions in the Middle East and refocusing market attention on concerns of an impending oil surplus.
The agreement, ratified by Israel’s government on Friday, marks a turning point in a conflict that had previously kept oil traders on edge over potential supply disruptions.
At the time of reporting, Brent crude was trading at $64.46 per barrel, while West Texas Intermediate (WTI) hovered around $60.81, both slightly up from Thursday’s close but trending lower on the week.
Analysts attributed the decline to the waning “war premium” that had inflated prices since the outbreak of hostilities.
“This deal saw the focus move back to the impending oil surplus, as OPEC proceeds with the unwinding of production cuts.”
Daniel Hynes, senior commodity strategist at ANZ
Hynes added that despite the ceasefire, oil prices may still find short-term support from ongoing market recalibrations tied to supply management by the Organization of the Petroleum Exporting Countries and its allies (OPEC+).
Calm After Conflict
The ceasefire agreement, brokered with backing from the United States and regional partners, forms the first stage of a broader peace initiative aimed at ending the war in Gaza.
Under the deal, Israel will partially withdraw its forces, while Hamas will release the remaining hostages in exchange for hundreds of Palestinian prisoners held by Israel.
The accord has significantly eased concerns over maritime security in the Red Sea and the Suez Canal, vital arteries for global oil shipping.
“Finally having some kind of peace process in the Middle East is lowering the shoulders a little bit.
“This could ease fears about crude carriers passing through the Suez Canal and the Red Sea.”
Bjarne Schieldrop, chief commodities analyst at SEB
For months, shipping routes in the region faced intermittent attacks by Houthi rebels in Yemen, who claimed to be targeting vessels linked to Israel in solidarity with Gaza.
The disruptions had raised freight costs and temporarily tightened oil supply chains, contributing to market volatility.
With the ceasefire now in place, analysts believe the immediate geopolitical risk premium is diminishing, leaving fundamentals supply, demand, and production policy as the primary drivers of prices.
OPEC+ Supply Strategy Back in Focus
Attention has quickly shifted back to OPEC+ and its ongoing strategy to phase out production cuts implemented to stabilize prices during earlier market softness.
The group’s decision at its latest meeting to add only a modest increase in output, smaller than many had feared helped temper oversupply concerns and limited the extent of this week’s price declines.
“Markets’ expectations for a sharp ramp-up in crude supply have not manifested themselves in substantially lower prices,” noted analysts at BMI Research in a statement on Friday. “The most recent rise in production is lower than previously feared, contributing to a slight rise in prices for the week.”
Despite this, the broader outlook remains cautious. Analysts say that with global inventories rising and economic growth slowing in key markets, supply could soon outpace demand.
The International Energy Agency (IEA) has also warned that the market could move into surplus by early 2026 if OPEC+ continues to unwind cuts aggressively.
On a weekly basis, both oil benchmarks were still on track to end in positive territory, Brent up roughly 1% and WTI gaining about 0.6% recovering slightly from steep losses recorded the previous week.
Prices rose midweek following stalled peace talks between Russia and Ukraine, which revived fears of extended sanctions against one of the world’s largest oil exporters.
“The ongoing threat of sanctions and secondary tariffs targeting Russia continues to provide support for oil benchmarks.
“A more aggressive stance from President Trump could place broader Russian supply at risk.”
Warren Patterson, Head of Commodity Strategy at ING
Patterson also highlighted another potential flashpoint: Ukrainian drone attacks on Russian energy infrastructure.
“While most of these attacks have focused on refineries, there have been instances targeting port infrastructure, which could directly impact crude oil exports.”
Warren Patterson, Head of Commodity Strategy at ING
Oversupply Risks Persist
Despite intermittent geopolitical boosts, most analysts agree that oil’s medium-term trajectory remains subdued.
A gradual buildup in global supply, coupled with steady output growth from non-OPEC producers like the United States and Brazil, continues to cap price recovery.
ING’s forecast suggests that while temporary rallies are possible, crude prices are likely to remain range-bound for the rest of the year and into 2026. “Oversupply will keep a lid on prices both for the remainder of this year and all of next,” Patterson said.
For now, traders appear to be recalibrating positions, with market sentiment driven more by supply-demand realities than by geopolitical speculation.
While the Israel-Hamas ceasefire brings relief to a tense region, its broader impact on oil prices may prove short-lived unless demand fundamentals strengthen or new disruptions emerge.
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