The oil price rally lost steam after President Donald Trump’s diplomatic efforts to de-escalate tensions in Lebanon calmed commodity markets, pushing global oil prices lower and allowing crude to ease from earlier multi-week highs. Brent crude for August delivery was down 1.7% to trade at $93.35 per barrel at 4.45 am ET, while WTI crude for July delivery was down by a similar margin to change hands at $90.65/bbl.
Trump took to Truth Social to claim talks are advancing rapidly and that both Israel and Hezbollah had agreed to halt hostilities. He also noted a productive call with Israeli Prime Minister Benjamin Netanyahu to de-escalate the situation.
Meanwhile, Iranian state media and the Revolutionary Guard in Tehran reported that indirect communications with the U.S. had been suspended in protest over Israeli military operations in Lebanon.
On Monday, The Lebanese Embassy in Washington stated on social media that Hezbollah had accepted the terms of a U.S. proposal “for a mutual cessation of attacks.”
“Under the proposed arrangement, Israeli strikes on Beirut’s southern suburbs would cease in exchange for Hezbollah refraining from attacks against Israel,” the embassy said. “The ceasefire would then be expanded to encompass all Lebanese territory.”
Crude was not the only market giving back some of its recent gains. Treasury yields moved lower as traders dialed down some of the worst-case scenarios that had been building into markets during the latest escalation. Even so, investors appeared reluctant to make large directional bets, with many waiting for confirmation that any ceasefire effort can survive the next round of statements from Washington and Tehran.
Critical U.S. labor reports will most likely determine the level of caution this week, as the April JOLTS job openings data and the May non-farm payrolls (NFP) report hold the key to any near-term Federal Reserve interest rate policy decisions. Traders will be watching to see if job vacancies continue to slow from their previous reading of 6.866 million, with a softer report likely to indicate that the labor market is cooling and the Fed would have room to adjust rates. Scheduled for release on Friday, markets are currently forecasting job growth around 95,000 with the unemployment rate expected to hold steady at 4.3%.
By Alex Kimani for Oilprice.com
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