Oil Rally Loses Momentum

Oil prices eased on Monday after Iran indicated that its military operations against Israel had ended, reducing fears that the latest exchange of strikes could escalate into a wider regional conflict.

Brent crude, the international benchmark, rose 1.41% to $94.40 per barrel, while U.S. West Texas Intermediate crude gained 0.81% to $91.27 per barrel. Both contracts had surged more than 5% earlier in the session as investors reacted to escalating tensions in the Middle East.

The pullback came after officials from Iran’s Foreign Ministry stated that Tehran had halted its attacks against Israel, although they warned that military action could resume if Israeli operations in Lebanon continue.

First Major Exchange Since Ceasefire

The latest confrontation marked the first direct exchange of strikes between Iran and Israel since the ceasefire agreement reached in April.

Iran launched missiles toward Israel in response to Israeli military operations targeting Hezbollah-linked positions in Lebanon. Israel subsequently carried out strikes against military targets in western and central Iran, according to statements from the Israel Defense Forces.

The rapid escalation initially sparked concerns about potential disruptions to energy supplies and shipping routes throughout the region, contributing to the sharp spike in crude prices.

Diplomatic Efforts Continue

President Donald Trump sought to calm tensions by signaling that both sides were exploring a path toward de-escalation.

Trump stated that negotiations with Iran regarding a broader agreement were continuing and expressed optimism that both countries could eventually return to a ceasefire arrangement.

However, mixed signals emerged from Iranian officials involved in negotiations, with some indicating that prospects for a comprehensive agreement with Washington had become increasingly difficult following the latest violence.

Despite the uncertainty, Iran’s announcement that military operations had ceased helped reassure markets that an immediate escalation may be avoided.

Regional Tensions Remain Elevated

Although active hostilities have paused, the geopolitical situation remains fragile.

Iranian parliamentary officials criticized both Israeli military actions in Lebanon and U.S. naval activities in the region, arguing that they violate the terms of the April ceasefire agreement.

Iran also warned that American and Israeli assets could become targets if tensions continue to rise, highlighting the ongoing risks facing energy markets.

Investors remain highly sensitive to developments in the Middle East due to the region’s critical role in global oil production and transportation.

OPEC+ Adds Supply

Additional pressure on oil prices came from OPEC+, which agreed to increase production targets by 188,000 barrels per day beginning in July.

The move represents the fourth consecutive output increase since the reopening of shipping routes through the Strait of Hormuz and follows similar production adjustments implemented earlier this year.

The additional supply is intended to help stabilize markets and ensure adequate global availability as demand remains strong.

Analysts note that the combination of easing geopolitical fears and increased production helped limit the day’s gains in crude prices.

Outlook

While oil prices remain elevated, the market’s sharp retreat from intraday highs suggests traders are becoming less concerned about an immediate escalation between Iran and Israel.

However, the situation remains highly fluid. Continued instability in Lebanon, ongoing negotiations between Washington and Tehran, and broader regional security concerns could quickly reintroduce volatility into energy markets.

At the same time, OPEC+’s decision to gradually increase output may provide a counterbalance to geopolitical risks, helping prevent a more sustained surge in oil prices if supply disruptions remain limited.