Global oil markets responded with cautious optimism on Thursday after Israel and Lebanon announced a United States-brokered ceasefire, triggering speculation that a broader peace agreement between Washington and Tehran could soon follow—a development that carries significant implications for Pakistan’s already strained fuel economy.
Brent crude futures declined by 87 cents to settle at $96.92 per barrel, while US West Texas Intermediate dropped 78 cents to $95.24 by early trading hours. The pullback came after both benchmarks had surged roughly two percent the previous day amid escalating hostilities, including Iranian strikes on Kuwait and American military operations near the strategically vital Strait of Hormuz.
The ceasefire between Israel and Lebanon, confirmed late Wednesday, has injected fresh momentum into diplomatic efforts aimed at resolving the protracted US-Israeli conflict with Iran. Tehran has consistently linked any potential agreement to a halt in Israeli military actions against Lebanon, making the truce a critical precondition for progress.
US President Donald Trump suggested that negotiations with Iran could yield tangible results as early as this weekend, though Iranian Foreign Minister Abbas Araghchi offered a more measured assessment, acknowledging that while communication channels remain open, no substantive breakthroughs have yet materialized. Both sides are reportedly reviewing exchanged proposals.
In a separate interview, Trump claimed that the United States would soon coordinate with Iran to remove high-level enriched uranium from Iranian facilities, describing it as part of ongoing discussions. He also praised Israeli Prime Minister Benjamin Netanyahu while emphasizing that Israel’s military campaign against Iran would not have been possible without American support.
Meanwhile, political turbulence in Washington added another layer of complexity. The Republican-controlled House of Representatives approved a resolution Wednesday aimed at blocking Trump from continuing the war with Iran. The president dismissed the vote as “meaningless” and “unpatriotic,” though the measure would require Senate approval and veto-proof majorities in both chambers to take effect.
On the supply side, US crude inventories fell by eight million barrels last week—double the anticipated drawdown—bringing stockpiles to 433.7 million barrels. The International Energy Agency warned Tuesday that global oil reserves could reach critically low levels ahead of peak summer demand if current depletion rates persist, despite a significant drop in Chinese crude imports.
Analysts at ING cautioned that even if oil flows through the Strait of Hormuz resume quickly, recovery would be gradual, keeping upward pressure on prices through the third quarter.
The geopolitical uncertainty also rattled Asian financial markets. Stock indices across the region tumbled, with MSCI’s Asia-Pacific index falling 1.6 percent and Japan’s Nikkei dropping 1.4 percent as investors shifted into risk-off mode.
In Iran, Supreme Leader Mojtaba Khamenei issued a defiant message Thursday, warning that external enemies—having failed militarily—were now attempting to undermine public morale and create internal divisions. He called for national unity and accused the United States of using Israel as a military outpost to prevent Iran’s regional influence from expanding.
Kuwait Airways suspended all operations indefinitely following reported damage to Kuwait International Airport linked to drone incidents attributed to Iranian aggression, underscoring the conflict’s ripple effects across the Gulf.
For Pakistan, the stakes are considerable. The country imports the vast majority of its petroleum needs, and any sustained spike in global oil prices directly translates into higher fuel costs at the pump, increased inflationary pressure, and strain on foreign exchange reserves. With petrol prices already surging past Rs. 500 per liter in parts of Balochistan, Pakistani households and businesses are acutely vulnerable to Middle Eastern volatility. A durable peace agreement that stabilizes oil markets could provide much-needed relief, while renewed hostilities would likely deepen economic hardship.
