Key Points:
- Oil prices recover as doubts grow over supply reopening
- Strait of Hormuz remains partially disrupted
- Investors price in prolonged geopolitical risk
- Analysts warn supply normalisation may take weeks
ISLAMABAD: Global oil prices rebounded on Wednesday as investors grew increasingly sceptical that the recently announced US-Iran ceasefire would swiftly restore disrupted crude flows, keeping markets on edge despite initial optimism.
The early sell-off following the truce announcement proved short-lived, with benchmark crude reversing losses as traders reassessed the ground situation and the likelihood of a sustained supply recovery.
Israel’s massive strikes on South Lebanon that killed a score of people while injuring an even bigger number served as the first blow to the ceasefire optimism on the market floors.
Market participants now view the ceasefire as fragile, with limited immediate impact on oil’s physical movement. Trump’s statement that Lebanon was not part of the US ceasefire understanding strengthened scepticism, exposing the truce’s fragility.
At the centre of concerns is the Strait of Hormuz, a critical artery for global energy supplies, which continues to face operational disruptions amid lingering security risks. Shipping activity remains constrained, with elevated insurance costs and cautious tanker movements preventing a return to normal transit levels.
The market is transitioning from a relief-driven reaction to a more cautious stance, factoring in the complexities of restarting supply chains after weeks of conflict.
Even in the presence of a ceasefire, logistical bottlenecks, damaged infrastructure, and persistent geopolitical tensions are expected to delay any meaningful increase in exports.
The evolving sentiment has reintroduced a risk premium into oil prices. It reflected uncertainty about the truce’s durability and the potential for renewed escalation. Traders remain wary that any breakdown in diplomatic efforts could quickly tighten supplies again, amplifying volatility in global energy markets.
With no clear timeline for full restoration of flows, oil markets are likely to remain sensitive to geopolitical developments, with price movements driven as much by headlines as by fundamentals in the coming weeks.
