Oil prices moved slightly higher in Asian trade on Friday following news that Hezbollah refused a proposed ceasefire with Israel, a step that hampered U.S. diplomatic efforts aimed at stabilizing the broader Middle East conflict.
Market moves were modest but directional: Brent crude futures for August increased 0.3% to $95.29 a barrel as of 20:19 ET (00:19 GMT), while West Texas Intermediate futures were up 0.1% at $90.05 a barrel. The uptick left crude on course for weekly gains after a renewed episode of military activity across the region.
The immediate catalyst cited by traders was Hezbollah's Thursday decision to reject the ceasefire that had been proposed between Lebanon and Israel. The Iran-backed, Lebanon-based militia additionally stated it would not pull its forces back from southern Lebanon and criticized the Lebanon-Israel negotiations that had been underway.
Violence persisted on both sides: Israel continued air strikes in southern Lebanon and faced retaliatory strikes from Hezbollah, while Israeli authorities indicated their forces would not withdraw from the south or halt operations after a brief pause earlier in the week. The continuation of fighting added to uncertainty over the trajectory of regional hostilities.
Analysts and market participants noted the wider diplomatic implications. Tehran has repeatedly signaled that a ceasefire in Lebanon is essential for any durable peace arrangement with the United States, and Hezbollah's rejection undercuts hopes that Washington could secure an Iran-related agreement. Earlier reports this week indicated Iran had suspended indirect talks with the U.S., after Tehran accused Washington of breaching their truce with recent attacks.
The cycle of strikes extended beyond Lebanon: U.S. forces struck several targets in Iran during the week, and those strikes prompted retaliatory actions by Iran's Revolutionary Guard against American positions in Kuwait and Beirut. Those exchanges occurred even as U.S. officials maintained publicly that a peace deal with Iran was near and that negotiations continued. Observers said, however, that there has been little concrete evidence of diplomatic breakthroughs despite U.S. statements since at least late-March.
On the oil supply side, both Brent and WTI futures appeared poised to rise between roughly 3% and 6% for the week, reflecting constrained flows through the Strait of Hormuz. While U.S. interventions have helped increase ship crossings through the channel, overall deliveries remain well below pre-war levels, keeping a significant portion of global oil movement impaired.
That constraint is notable because about one-fifth of the world's oil consumption passed through the Hormuz waterway before the outbreak of the conflict. With no clear signs of de-escalation, continued disruptions to shipments are expected to keep physical supply concerns salient for oil markets and to support prices in the near term.
What this means for markets
Modest price gains reflect a market where geopolitical risk is the dominant driver. With limited improvement in shipping flows and persistent military exchanges, oil markets remain sensitive to further escalations or any diplomatic developments that could restore shipments to prior levels.