Oil prices experienced a decline on Monday, influenced by Israel’s troop reduction in southern Gaza and the initiation of new ceasefire negotiations with Hamas.
This geopolitical shift resulted in a decrease of Brent crude futures by $0.79 or 0.9% to $90.38 a barrel, while US West Texas Intermediate (WTI) crude futures fell by $0.48 or 0.6% to $86.43 per barrel.
Following Israel’s announcement on Sunday of a significant military drawdown in Gaza, leaving only one brigade, and the dispatch of delegations to Egypt for ceasefire discussions, the oil market reacted negatively as the deadlock in talks persisted.
Analysts attribute the drop in oil prices to the diminished geopolitical risk premium and speculate that a rise in US crude oil inventories last week also contributed to the trend.
The situation is further complicated by the uncertainty of Iran’s response to the recent bombing of its consulate in Syria, which resulted in the deaths of key members of Iran’s Islamic Revolutionary Guard Corps (IRGC), including Brigadier General Mohammad Zahedi and his deputy, General Mohammad Hajriahimi.
Iran’s Foreign Minister, Hossein Amirabdollahian, condemned the attack as a breach of international norms and held Israel responsible, with Iran vowing retaliation.
This has raised concerns about a potential escalation in the Middle East conflict, which saw oil prices surge by 4% last week, marking Brent futures’ longest winning streak since August 2023.
Economic indicators such as the US employment report, which showed a strong end to the first quarter, may influence the Federal Reserve’s interest rate decisions.
Additionally, upcoming consumer price index data from the US and China will provide insights into the economic health of the world’s leading oil consumers.
