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Oil prices have staged a rebound, underscoring the fragile sentiment around the current geopolitical environment in the Middle East.
While the initial announcement of a ceasefire triggered a sharp pullback, the market has quickly repriced risk as doubts emerge regarding its scope and application.
After the initial headline reactions, markets could turn to focus on the supply reality on the ground.
The continued disruption in the Strait of Hormuz remains a source of concern. Ongoing constraints on tanker flows through the waterway could leave near-term supply expectations tight. Markets could remain attentive to any developments on this front, including efforts to form a coalition to secure shipping.
From a forward-looking perspective, oil could remain elevated during this period of uncertainty amid diplomatic talks. A durable ceasefire and a reopening of the Strait of Hormuz could trigger renewed downside pressure as supplies gradually return to normal conditions. However, any deterioration in security conditions or infrastructure disruptions could quickly amplify supply fears, reinforcing volatility and supporting prices in the near term.
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