The Middle East’s latest peace deal just got a peace deal of its own.
Israel and Hezbollah agreed Friday to halt fighting in southern Lebanon after days of escalating clashes threatened to derail the fragile US-Iran peace process, reducing the risk that the first major test of the U.S.-Iran agreement would turn into its first major failure.
Negotiations between Washington and Tehran are supposed to begin under a 60-day framework agreement designed to end the war, reopen the Strait of Hormuz, and eventually restore millions of barrels per day of disrupted oil supply. But before those talks could even get underway, fighting between Israel and Hezbollah was already testing the limits of the agreement.
Oil markets noticed.
After collapsing from more than $100 per barrel in May to below $77 earlier this week, Brent crude climbed back above $80 on Friday as traders reassessed just how stable the region really is.
The market’s recent selloff was built on a simple assumption: the war is over, and oil is coming back.
Reality, as usual, appears more complicated.
Neither Israel nor Hezbollah is a formal party to the U.S.-Iran agreement. Israel has repeatedly said it intends to maintain military operations in southern Lebanon until security threats are eliminated.
Hezbollah has insisted that any lasting halt to attacks requires an Israeli withdrawal.
In other words, one of the biggest risks to the broader peace process comes from actors who weren’t sitting at the negotiating table.
The latest truce may buy diplomats some breathing room, but it does little to resolve the underlying tensions that sparked the fighting in the first place.
The oil price collapse of the past two weeks reflected growing confidence that Middle Eastern supply disruptions would soon become a thing of the past.
And that may eventually happen, but every ceasefire, truce, and memorandum signed comes with an asterisk.
The Strait of Hormuz may be moving toward reopening. The Middle East itself remains very much a work in progress.
By Julianne Geiger for Oilprice.com
More Top Reads From Oilprice.com
- India Receives First Post-Deal LNG Cargo Through Strait Of Hormuz
- Beijing Steps Up Scrutiny of Indium Exports as AI Chip Demand Soars
- Hormuz Traffic Stalls as U.S.-Iran Talks Collapse
