The announcement of a ceasefire between Israel and Hezbollah has had an impact on global oil markets, easing concerns about supply disruptions in the Middle East.

Traders are now turning their focus to the upcoming OPEC+ meeting, which may further shape the oil price landscape. This comes as Brent and WTI benchmarks dip, Reuters reported.

Oil Markets and the Middle East Truce

After days of intense conflict along the Israeli-Lebanese border, a ceasefire brokered by the United States and France promised to reduce regional instability.

The agreement, set to take effect today (Wednesday), has already impacted oil prices, with Brent crude settling at $72.81 per barrel and WTI at $68.77. Analysts attribute the decline to reduced geopolitical risk, which previously kept a premium on oil prices.

The ceasefire coincided with critical discussions within OPEC+, the group responsible for nearly half of the world's oil production. According to sources, the alliance is considering delaying a planned output hike initially scheduled for January due to a slowdown in global demand and rising production outside OPEC+.

Israel-Hezbollah ceasefire agreement begins in Lebanon https://t.co/8XATc4aWls

— Al Jazeera English (@AJEnglish) November 27, 2024

In addition to Middle East developments and OPEC+ talks, US energy policy is reportedly influencing market sentiment. President-elect Donald Trump's proposed 25% tariffs on imports from Mexico and Canada could disrupt the flow of crude oil, particularly from Canada, a major supplier to the US.

Impact of US Policy and Inventories

Meanwhile, US crude inventories fell by nearly six million barrels last week, reflecting robust domestic demand. Gasoline and distillate stocks rose, indicating seasonal shifts in refining activity. US President Joe Biden emphasized the agreement's potential to ensure long-term stability in the region, stating that this is meant to be a permanent cessation of hostilities.

As Israeli forces prepare to withdraw and Lebanese troops secure border areas, traders and policymakers alike will assess the lasting impact of this ceasefire on oil supply chains and regional security.

Oil prices now remain at the mercy of geopolitical developments and policy decisions. With the OPEC+ meeting just days away and uncertainty surrounding global demand recovery, markets are poised for further volatility.

Earlier reports showed that the geopolitical tensions in the Middle East pushed oil prices to their strongest highs since March 2023. For instance, at some point last month, prices tested two-month highs. The conflict escalated when Israel bombed Hezbollah strongholds in Beirut's southern suburbs, and Hezbollah launched rocket attacks on northern Israeli cities, including Haifa.