Brent crude settled at $95.03 per barrel, down $2.78 (2.8%), while West Texas Intermediate (WTI) crude fell $2.98 (3.1%) to close at $93.04 per barrel.
The decline followed news that Israel and Lebanon had agreed to implement a ceasefire, raising expectations that broader regional negotiations could gain momentum. Iran has previously linked progress in its discussions with Washington to an end to fighting involving Hezbollah, the Iran-backed group operating in Lebanon.
The move lower reversed gains from the previous session, when oil prices rose on renewed military activity in the region, including Iranian missile attacks on Kuwait and U.S. strikes near the Strait of Hormuz. Traders viewed the ceasefire announcement as a potentially important step toward reducing geopolitical tensions and easing risks to global energy supplies.
Market participants also pointed to signs that shipping activity could gradually improve. Although traffic through the Strait of Hormuz remains severely restricted, some vessel repositioning activity has been observed near the Persian Gulf, fueling speculation that maritime flows could begin to normalize if diplomatic efforts continue to advance.
Despite Thursday’s selloff, concerns about tight oil supplies remain. U.S. crude inventories fell by 8 million barrels during the week ending May 29, according to Energy Information Administration data released Wednesday, significantly exceeding expectations for a 4.0 million barrel draw. The larger-than-expected decline highlighted ongoing strength in refinery demand and exports.
Additional support for the market came from comments by UBS analysts, who noted that as long as flows through the Strait of Hormuz remain constrained, the underlying balance of risks continues to favor higher prices. Meanwhile, OPEC reiterated its expectation for solid global oil demand growth and left its forecasts unchanged despite ongoing disruptions in the Middle East.