Oil prices experienced a decline on Thursday following President Trump’s announcement that Israel and the Palestinian group Hamas have accepted the “first phase” of a peace plan proposed by the U.S. administration. Futures contracts for Brent crude, which serves as the global benchmark, dropped by more than 0.8% after a week of rising prices. Similarly, futures for West Texas Intermediate (WTI) crude, the U.S. benchmark, saw a comparable decline.
The peace plan outlined by the Trump administration includes provisions for both parties to release hostages, while Israel would initiate a withdrawal from Gaza, the focal point of the ongoing conflict. This agreement marks a significant development in the Israel-Palestine negotiations, as it is one of the first meaningful steps toward the potential resolution of the war in recent months.
In recent weeks, the conflict between Israel and Hamas had escalated, impacting global oil prices. Initial spikes in oil prices were observed, particularly during a period in early June when exchanges of airstrikes occurred between Israel and Iran, triggering concerns about a potential decrease in Iranian oil supplies. However, this spike proved to be transient, and both Brent and WTI crude have now fallen approximately 12% year-to-date.
Rystad Energy, a global energy consultancy, has indicated that future price dynamics will largely depend on the success or failure of the peace deal, as well as ongoing developments in the war in Ukraine. Claudio Galimberti, chief economist at Rystad, noted that the immediate effect on the oil markets would be a slight reduction in the geopolitical risk premium as details of the peace plan are clarified.
Galimberti emphasized that should the peace plan prove credible and sustainable, its impact on oil prices could be significant and long-lasting. Nevertheless, he cautioned that as long as the conflict in Ukraine remains unresolved, the geopolitical risk premium is expected to remain high.
